US Insights

Amazon Tech is the Star of the Whole Foods Pickup Program

Tory Gundelach

Vice President

Retail 08.13.2018 / 09:00

Whole_Foods_Markham_Canada

Amazon’s move could be the first grocery-related benefit to bring new shoppers into Whole Foods.

We all knew this day would come. Earlier this week, Amazon and Whole Foods launched curbside pickup at Whole Foods for Prime members. Prime members can now order groceries through the Prime Now app and pick them up at select Whole Foods locations using reserved parking spots. One-hour pickup for orders over $35 is free for Prime members, with 30-minute pickup available for $4.99. While click-and-collect has existed at many of the major grocery players for some time now, this announcement is significant for a few reasons.

Click-and-collect can help widen Whole Foods’ audience reach.

While the introduction of pickup at Whole Foods comes as no surprise, some of the panic that ensued in the industry when Amazon acquired Whole Foods has not yet come to fruition. Even though Amazon advertised lowered Whole Foods prices post-acquisition, the true impact in stores was minimal because prices were cut only on select products. New Prime-exclusive savings at Whole Foods are also relatively underwhelming, with the 10% discount limited to select sale items. As a result, Amazon has made little progress in eliminating the “Whole Paycheck” image.

That said, the other major initiative that Amazon has implemented since acquiring Whole Foods is delivery via Prime Now. Although this expands Whole Foods’ online grocery capabilities, Prime Now is available only in major metro areas. To that point, most shoppers have not converted to grocery delivery outside of urban, high-income shoppers who were already Whole Foods core demographic. Amazon’s move into curbside pickup could be the first grocery-related benefit to bring net-new shoppers into Whole Foods and, more broadly, Prime membership. Click-and-collect has gained decent adoption in suburban markets and among more mainstream shoppers, so Prime Now delivery could be enticing to time-strapped parents trying to feed their kids natural/organic foods. In turn, watch for online grocery pickup to come to suburban Whole Foods stores first.

Even in its curbside debut, Amazon’s technology shows up the competition.

Using the Prime Now app, shoppers can alert Amazon when they are on their way to the pickup location so their order is ready as soon as they arrive. By allowing workers to stage orders in advance, Amazon is building efficiency into the click-and-collect process that we have not seen at other retailers. Leveraging existing technology also reduces the need for Whole Foods to install additional equipment in its parking lots. Most competitors today either operate a call box or have an employee come out to greet the vehicle.

What’s next for Whole Foods pickup?

We could see more innovation in click-and-collect immediacy. Bear in mind that this is not Amazon’s first foray into grocery pickup; the retailer has been testing the service at its two AmazonFresh pickup locations in Seattle. Here, AmazonFresh members get the added perk of being able to retrieve orders in 30 minutes. While this benefit is now available at Whole Foods, more engaged members, such as Prime credit cardholders, could be the priority for even faster fulfillment times in the future. Beyond that, expect Amazon to continue leveraging its technology expertise to build baskets and drive impulse, perhaps by offering geotargeted mobile promotions as shoppers near Whole Foods.

More broadly, anticipate further consolidation of Amazon’s grocery offer as Whole Foods becomes a manifestation of the Prime ecosystem. Alexa, for example, is already playing a role in the Whole Foods trip by enabling shoppers to add items to their Prime Now Whole Foods cart with their voice. Ultimately, Amazon will continue to elevate the added value of Prime (beyond price) as it integrates with Whole Foods.

Key implications for suppliers:

  • Support Amazon in driving adoption of Whole Foods pickup, perhaps by offering a discount or future credit for choosing click-and-collect over less profitable home-delivery options.
  • Explore ways to capitalize on this new shopper touchpoint, recognizing the opportunity for sampling, geotargeted promotions, and other mobile executions through the Prime Now app.
  • With click-and-collect, expect new requirements for inventory management as demand escalates.

Key implications for retail competitors:

  • Leverage meal-kit offerings and ensure store trips can be done quickly to protect against losing trips to Whole Foods. Suburban shoppers will look to replace their current click-and-collect trips, particularly on fill-in and “dinner tonight” trips, given the short order turnaround.
  • Focus on affordable natural organic products, especially private label options to protect against decreasing basket size on the part of middle-income shoppers. Since these shoppers cannot afford to do their entire shop at Whole Foods, the new curbside pickup now reduces the time and effort to pick up just a few items.
  • Build out and tout benefits of current loyalty programs. This new service gives Prime members one more reason to stay in the Amazon ecosystem, so ensure they have a good reason to venture out.

Source: Kantar Consulting

Editor's Notes

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