Five years ago, Amazon finalized its $13.7 billion acquisition of Whole Foods Market, marking its largest acquisition to date. This move sent ripples through the grocery industry, raising questions about the future of the organic grocer under Amazon’s ownership. Since then, the retail landscape has undergone significant changes, and Whole Foods has evolved in response. Let’s examine the influence of “Do Amazon Own Whole Foods” and the transformations that have occurred within Whole Foods since the acquisition.
While Amazon’s online sales have faltered, revenue at physical stores, including Whole Foods, climbed 12% in the second quarter, with Amazon jumping deeper into in-person retail, focusing on groceries.
Alt text: Exterior view of a Whole Foods Market store, showcasing the brand’s signage and entrance, representing Amazon’s physical retail presence.
Operational and Supply Chain Evolution
On the operational front, Amazon has centralized certain processes, shifting them from individual stores to Whole Foods’ headquarters in Austin, Texas. However, contrary to some predictions, Whole Foods has not morphed into a conventional supermarket. In fact, the company claims to have added 3,000 local brands in the past five years, a 30% increase since before the acquisition, emphasizing its commitment to regional suppliers.
Whole Foods utilizes “foragers” to scout for new local products. This model enables smaller brands to remain in select stores instead of requiring them to supply products companywide. Furthermore, Amazon leverages its data analytics capabilities to determine which brands are sold in specific stores, enhancing personalization.
A new accelerator program fosters opportunities for local producers to gain shelf space in local stores. Additionally, certified training programs transform Whole Foods workers into accredited cheesemongers and butchers. While some hot food bars, free samples, and specialty chef counters were temporarily suspended during the COVID-19 pandemic, Whole Foods reports that they have since returned.
Whole Foods also maintains its commitment to local and clean products. The company has more than doubled its list of banned food ingredients, bringing the total to over 250. The standards for canned tuna, eggs, and chicken have also been enhanced. In 2019, plastic straws were banned, and other plastics were minimized through the introduction of new types of produce bags and rotisserie chicken containers.
Autonomous Shopping and Technology Integration
One of the most noticeable changes for shoppers is the integration of technology within Whole Foods stores.
Customers now have the option to enroll their palm print with Amazon One to make payments without a card or phone. This technology is available at more than 20 Whole Foods locations, with plans to expand to 65 more stores in California.
Alt text: A person using the Amazon One palm-scanning technology at a Whole Foods Market checkout, illustrating Amazon’s integration of biometric payment systems.
Amazon has also introduced Just Walk Out technology at two Whole Foods locations, enabling checkout-free shopping. Hundreds of cameras monitor shoppers’ movements, and hidden scales weigh items as they are removed from the shelves.
Price Adjustments and Private Label Expansion
Amazon’s focus on lower prices has influenced Whole Foods’ offerings. An Amazon spokesperson stated that the goal was to “make high quality, organic foods more affordable and accessible for everyone.” Since the acquisition, prices have been lowered across aisles, and Prime Membership Discounts and Prime Member Deals have been introduced in stores.
To boost margins, Amazon has emphasized the sale of private-label goods. Whole Foods’ 365 private label underwent a brand refresh in 2020, and 295 new products were added to the line last year, bringing the total to 2,200 today.
Alt text: A display of Whole Foods Market’s 365 Everyday Value private label products, showcasing the brand’s refreshed packaging and variety of offerings.
Online Order Fulfillment and Dark Stores
Online grocery orders have become a critical focus for Amazon. Whole Foods reported a threefold increase in online orders in 2020 compared to 2019.
To improve the efficiency of online order fulfillment, Whole Foods has built a “dark store” in Brooklyn, New York, which is closed to customers and dedicated to preparing delivery orders.
Measuring the Success and Future Outlook
It is challenging to definitively measure the success of the Whole Foods acquisition because Amazon rolls its sales into the physical stores category, alongside other retail formats.
However, there are indications of recovery. Placer.ai found that the number of visits to Whole Foods is now hovering at about the same level as July 2017, before the acquisition. Additionally, Whole Foods plans to add 50 new stores in fast-growing regions soon.
With Amazon Go, Amazon Fresh, and Whole Foods, the company has a three-pronged approach to attack the grocery market, catering to different consumer segments. While Amazon has clearly impacted Whole Foods, the grocer retains much of its original identity.
The acquisition of Whole Foods by Amazon has led to significant changes, from operational adjustments and technology integration to price adjustments and an increased focus on online order fulfillment. While the long-term success of the acquisition remains to be seen, Whole Foods continues to evolve under Amazon’s ownership, catering to changing consumer preferences and market dynamics.
