An Amazon and Whole Foods Market Case Study

An Amazon/Whole Foods Market Case Study.

Overview

   Amazon is the world’s largest online retailer, also Amazon is the highest-ranking shopping website in the US and worldwide in unique audience. Whole Food Market (WFM) is American supermarket chain specializing in organic and natural food.

   Whole Food Market has around 450 stores across US, UK, and Canada. Average WFM shopper is middle to upper class customer with average income around $100k.

Analysis  

     Natural and organic foods are one of the fastest growing market segments in the United States, growing at triple the rate of other food sales. Much of this growth is attributed to the cultural shift toward healthy eating. After Amazon acquisition, the organic food category is likely to become available to more households and income levels.

    Most natural benefits of market share first strategy, are low prices for customer and exceptional convenience service. The less Amazon charges, the less money it makes per unit sold, but sells more units.

    With an extensive physical store footprint, advanced delivery infrastructure, and well-seasoned supply chain logistic, I think that Amazon has great chance to improve overall consumer experience.

    WFM potentially give Amazon 460+ showrooms to cross sell lots of products and services outside of Food. Amazon may be able to add its locker concept to WFM, what it would reduce last-mile delivery cost significantly, potentially allowing WFM to get even more aggressive on price or allow to Amazon to bundle additional service into Prime.

    WFM on the other hand could benefit from automation at checkouts and reduce operation costs.

 Amazon fresh: Supply chain logistic and warehousing associated with food retail are highly complex and significantly different from that other traditional ecommerce operations.

   The consumers enjoy selecting their own food and value the in-store experience as well as the certainty that the food is correct and fresh.

   Amazon Fresh supply chain and fulfilment capabilities gained WFM distribution centers. To generate enough profit per order Amazon should improve fulfilment and shipping. This was a significant constraint for the quick expansion of the program. Amazon limited density in every market for groceries.

   Additionally, the high mix of WFM’s perishables products would overlap nicely with Amazon Fresh strengths in non-perishables, and allow both companies to aggressively compete on price while still covering the costs of fulfilment and delivery.  WFM should significantly reduce the future fixed investments required for additional Amazon Fresh fulfilment center.

   Whole Foods locations provide Amazon with large retail presence which it could use to showcase other Amazon products such as Kindles, Echos, and its private label goods. Acquiring Whole Foods may help improve Amazon’s relationship with food suppliers.