Amazon-Whole Foods, 1 Year Later: 4 Grocery Experts Share Their Insights

On June 16, 2017, ecommerce behemoth Amazon shook the grocery industry by announcing something completely unexpected: Its agreement to purchase the struggling natural grocer Whole Foods Market. What was anticipated, however, was the Seattle-based company’s eventual entrance into the grocery market, as it already had fundamentally changed such other markets as books, apparel, electronics and more.

Reactions among grocers and other industry experts have varied. Some experts have hailed Amazon’s move as a true game-changer that spells a new era of grocery retailing. Meanwhile, others believe the ecommerce company and Whole Foods together have too many problems to work through before they can become a true threat. And some have reserved judgement altogether.

It’s now been one year since the announced merger. Here’s what four grocery experts have to say on the anniversary:


Bill Bishop, Co-Founder and Chief Architect, Brick Meets Click

Bill Bishop, Co-Founder and Chief Architect, Brick Meets Click

While Amazon’s purchase of Whole Foods was a loud wake-up call for grocery retailers, the changes they’ve made in the first year are modest compared with what’s coming. We now see that Amazon considers grocery to be only a stepping stone in their larger effort to build themselves into the lifestyle of more American households. This is ultimately more about building relationships than it is selling products. Amazon has leveraged Whole Foods in two ways to make this happen:

  1. One involves expanding Whole Foods’ store locations to encourage a more rapid shift to online grocery spending. Having a physical presence in the market is important, and it's building that out with more Whole Foods stores.

  2. The other is using Prime to win the loyalty of the wealthiest 10 percent of households -- i.e., the source of most discretionary spending. It doesn’t matter that Prime has broader appeal: It's well accepted among wealthy customers.

Together, this will take profitable sales from even the largest food retailers and drive more store closings across the business.


David Diamond, President, David Diamond Associates

There is much to be said and written about the Whole Foods-Amazon merger one year later. Lots have happened, and yet some things have not yet happened. In any case, the overall reality is that much of the story remains to be written.

Certain themes and directions have clearly emerged, however, and are worth commenting upon. Specifically:

  1. Amazon is really moving at Amazon speed – not grocery speed. It has made significant changes very quickly, at the kind of pace at which Amazon moves, not the speed at which the grocery industry moves. I think this will be a wake-up call for the industry.

  2. One of Whole Foods' key attributes has always been local empowerment. Everyone at Whole Foods, from John Mackey on down, believes -- and I agree -- that part of the reason that Whole Foods runs great stores is that it empowers the local teams to make decisions on product assortment, marketing approaches and everything else. To be polite, let’s just say that Amazon doesn't agree. Amazon is all about data, systems and efficiency – and in the retail would, efficiency and uniformity go hand in hand. It will be very interesting to see how this conflict develops, but it is always likely that the buyer gets to decide.

  3. From an Amazon perspective, it seems like the big idea is to use the physical Whole Foods stores as a distribution depot for Amazon Prime. One year in, it seems more and more that the reason for the acquisition was not the Whole Foods business or its consumers, but the real estate footprint. The value of a store, with storage and refrigeration, very near many Amazon Prime customers seems to be the driver of the acquisition.

  4. Amazon and Whole Foods have very different ideas about consumer privacy, and that will be an interesting flashpoint moving forward. Amazon truly believes that consumes will happily exchange their purchase data in exchange for better customer service. We should expect that this hypothesis will be tested aggressively in Whole Foods stores, and sooner rather than later.

These are some relatively random thoughts on the subject, but hopefully, they will be useful in thinking about what this merger means and where it's going, one year later.


Ken Fenyo, Head of Consumer Markets, McKinsey Fast Growth

For most of the past year, the impact of Amazon’s acquisition of Whole Foods has been more psychological than physical. The deal has served as a pointed wake-up call to brick-and-mortar grocers that they could no longer ignore the threat of ecommerce generally, and Amazon specifically, to their businesses.

Recently, Amazon has more actively put its stamp on Whole Foods with the launch of exclusive savings and discounts for Prime members. Rolling out Prime will allow Amazon to expand Whole Foods’ customer base and capture troves of shopper data that Whole Foods has not previously collected. This data in turn will let Amazon deliver personalized offers and improve decision-making across merchandising, marketing, store ops and the supply chain.  

I would expect Amazon to accelerate the integration of Whole Foods by, among other things:

  1. Aggressively leveraging Whole Foods to jump-start its grocery ecommerce business, which has been slow to take off.

  2. Enhancing Whole Foods’ customer experience by integrating technology from Amazon Go, perhaps by creating grab-and-go sections in each store with automated checkout

  3. Overhauling Whole Foods' supply chain and fulfillment centers with its robotic and AI technologies.

In response, brick-and-mortar retailers are going to have to dramatically up their games by setting ambitious digital strategies, hiring the right talent and building startup ecosystems to close the innovation gap with Amazon.


Neil Stern, Senior Partner, McMillanDoolittle

It's been an interesting year. The moves so far that are visible to consumers:

  1. Reduced prices, initially, now followed by a more sophisticated discount program built around Prime membership
  2. Integration of Amazon Prime delivery in many markets to replace Instacart
  3. Lockers for Amazon pickup
  4. Introduction of Amazon products (Echo, etc.)

At the same time, there have been a number of perceived negatives. Amazon changed the replenishment program to more of an automated system, which has led to greater out-of- stocks. It has changed vendor relations, making it more difficult for small and local vendors to get in the stores, which has been a mainstay of WholeFoods' culture and a competitive advantage for many years.

I think this is a case of two very different cultures clashing and trying to work out the transition. Whole Foods was very instinctual and emotional in its approach; Amazon is all about analytics and data. It's been interesting matchup, to say the least.

Otherwise, we are waiting [for more on] the future of 365, the introduction of Go technology, the full integration of Prime, and store-growth plans.

About the Author

Randy Hofbauer

Randy Hofbauer is the former digital and technology editor of Progressive Grocer. He has more than a decade of experience as a content strategist, researcher and marketer, almost all of it covering CPG retailing. His insights and work have been cited in a number of media outlets, including The New York Times, the Associated Press and the Chicago Tribune, and he was named a finalist in the Software & Information Industry Association's 2018 Emerging Leader Awards. Follow him on Twitter or connect with him on LinkedIn.

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