It’s safe to say that Amazon’s acquisition of grocery giant Whole Foods was a momentous benchmark in the sphere of grocery retail. Many experts and analysts described the change as catastrophic for on-ground retailers and said ‘It would change the entire market.’
A year has passed since the acquisition and we are yet to see stark changes. The deal was supposed to change the entire face of the grocery market and influence traditional retailing. Instead, we are left wondering when the impact will be felt.
Head of customer markets at McKinsey Fast Growth, Ken Fenyo said, “For the majority of the year, the impact of Amazon’s acquisition of Whole Foods has been more psychological than physical.” He added that the deal has served as a pointed wake-up call to on-ground grocers. They could no longer ignore the threat of the internet generally, and Amazon specifically, to their businesses.
What companies are trying to do is mimic the same experience throughout on-ground stores, online sites and click and collect apps. Customers like the online experience, but also enjoy going to the actual stores.
Amazon has acknowledged this through its Whole Foods acquisition and Amazon Go which is set to begin shortly. Another highlight of the Whole Foods acquisition was roping in the prime real estate deal. Chances are high that Amazon plans to use the real estate and infrastructure for its prime services.
According to Analyst David Diamond, “It seems like the big idea is to use the physical Whole Foods stores as a distribution depot for Amazon Prime. One year in and it seems evident that the reason for the acquisition wasn’t solely Whole Foods consumers or business, rather real estate. The store is valuable as it not only contains refrigeration but also storage and is close to many Amazon Prime customers. This seems to be the driver of the acquisition.”
Fresh food is the area supermarkets can capitalize on. According to a study conducted by Nielsen, more than 50% of all supermarket sales are prepared foods and 40% are groceries. Investment and capital are required to keep the food as fresh as possible and to make sure that profits are maximized. With the sale of combo meals and prepared foods going up nearly 65%, it is certainly a worthy investment. Along with this increase, packaged coffee and yogurt have experienced an increase of 33% and 16% respectively. Sales of frozen yogurt and cheese have gone down 38% and 10% respectively. This study further solidifies why fresh foods can make or break a grocery store.
John Tavolieri, Nielsen’s president of U.S. FMCG and retail, and Chief Technology Officer and Operations said, “Fresh plays a crucial role in driving consumer traffic and loyalty. To win shoppers over, fresh has to be integral to a broader, more connected total-store approach that goes beyond category management.”
The grocery market is changing continuously and it’s about time that stores abandon the traditional way of doing things and adopt technology and logistics to keep up with the current demographic. Express delivery and visually appealing food products are the future of grocery. The only mantra that works wonders in today’s market is ‘The fresher, the better.”