As traditional retailers continue to look for new ways to evolve omni-channel models, tech companies are looking for ways to develop a physical presence. Amazon’s recent acquisition of Whole Foods is significant and demonstrates a convergence of two opposite but complimentary strategies – one we could likely see from more brands. In an interview with Campaign, Procter and Gamble Chief Brand Officer Marc Pritchard remarked, “The brilliance of it is critical integration. In a way, what it means is every manufacturer has to step up their game.”
It does not appear that Amazon will be making any immediate changes to the Whole Foods brand. But a transcript of remarks delivered at a town hall meeting, might hint at some future changes we might expect to see. Whole Foods CEO John Mackey remarked, “Over time, there could be other formats that evolve – that might – wouldn’t be branded Whole Foods Market, potentially wouldn’t be our standards.” How this could play out and what it will do to the brand is impossible to predict.
Whole Foods hasn’t had an easy go in recent years. Where once they dominated an upscale category of premium organic food, many mainstream food retailers have evolved to include similar offerings usually at lower price points, stealing customers. In a countermove, Whole Foods launched the 365 brand, offering private label goods at lower prices than typical formats, but it’s a move that pulls the brand in two directions. On one hand, the Whole Foods brand needs to maintain the allure of a premium experience, on the other the consumer demand for more affordable and conventional products.
Marks & Spencer CMO Patrick Bousquet-Chavanne remarked that the acquisition will help Amazon’s strategy for a “quality supply chain” behind their voice-assistant, Alexa. Indeed, Amazon has been in the food delivery business for quite sometime with Amazon Pantry and Amazon Fresh. But Bosuqet-Chavanne goes on to say, “The challenge [for food] is the economic model, the cost of the last mile.”
While delivery is the most immediate benefit that will be realized, technology too will have an impact both at the organizational and cultural level. Last year, Amazon debuted their Amazon Go store, which has eliminated the checkout line. While no plans exist to automate Whole Foods cashiers, the technology Amazon will bring into the mix will no doubt drive significant change. Culturally, Amazon is notoriously frugal whereas Whole Foods has higher costs than other grocers. What this means for compensation and operating models will no doubt have an impact
What’s most interesting about all of this is the convergence of traditional brands and digital brands along an axis that is focused on utility, not merely expansion or acquisition. In order to be more strongly competitive in the growing food delivery segment, Amazon needed that crucial supply-chain piece that Whole Foods provides. And in order to stay competitive, Whole Foods needed technology infrastructure that could take the brand deeper into the digital space. The match is so well made, that when Blue Apron, a competing food delivery service, had their IPO earlier this week, stock price was below what had been expected. Amazon’s model is more robust.
For digital brands looking to come into the real world, or real world brands struggling to extend in the digital, exploring what may seem an unorthodox partnership at first may leave both brands in better positions when the focus is on utility and what the customer needs and wants.
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