It looks like Whole Foods knows how to keep customers happy, according to a Morgan Stanley survey, where shoppers reported a better overall experience since Amazon's takeover.
The research firm studied various components of the grocery industry post-merger, including the customer makeup at Whole Foods, online shopping and obstacles that might be keeping the grocer from gaining more ground, reported Austin American-Statesman (Aug. 2). The biggest change at Whole Foods since teaming up with Amazon was better quality of products, followed by lower prices, the survey stated.
Since completing its $13.7 billion deal for Whole Foods last August, Amazon is focusing on prices by trying to draw more of its Amazon Prime customers into Whole Foods stores. Among its offerings, membership to Amazon Prime includes free grocery delivery and 10% off already discounted items at Whole Foods.
Amazon is building its business on Prime and on fostering strong relationships with shoppers, said Supermarket Guru Phil Lempert.
At Whole Foods, there is already a high amount of Prime membership to build upon, with almost 70% of Whole Foods shoppers reporting they were also Prime members. Meanwhile, Walmart customers represent the lowest percentage of Prime members, at 48%. At first glance, it may seem Whole Foods is the clear front-runner here, since Amazon's grocery efforts are commonly measured by what Walmart is doing. Whole Foods, whose Prime membership is 20 percentage points past Walmart, is ahead of the game here, right?
Well, not so fast. It will take more than that for Whole Foods and Amazon to get to the top of the grocery business food chain. The survey showed out of total money consumers spent at grocery stores in the past three months: Whole Foods had just 2% of the market share, compared to Walmart’s 23% market share.
In addition, Whole Foods has the greatest shopping overlap right now with Trader Joe’s, Fresh Market and Sprouts shoppers, with 38%, 37% and 29% of customers, respectively, also shopping at Whole Foods. But that overlap will lessen as Amazon and Whole Foods integrate more, and Whole Foods' business strategies start to be more in line with those of traditional grocery chains, according to Lempert.
Whole Foods, for example, recently moved away from a region-by-region buying strategy, which was instrumental in helping small, local brands make their way into stores. The retailer was known for taking small, innovative companies and growing them, but now that has changed. What that refocus means is Whole Foods now will be more likely to compete with regional chains like H-E-B, not the Trader Joe's of the world, Lempert noted.
What's more, Whole Foods’ generally higher prices continue to be a barrier, by a large margin. While many in the industry expect Amazon to address that with more Prime perks, that's just one small piece of the complicated puzzle. When it comes to who will emerge as the grocery business leader, it's still almost anybody's game.
Caito Foods is recalling pre-cut melons due to potential salmonella contamination.read more
Sarah writes for the weekly Food Institute Report and the daily news update, Today in Food. She also writes and edits the Food Institute’s annual publication The Food Industry Review and assists with The Demographics of Consumer Food Spending.
Sarah has more than 15 years of experience as a writer and editor, with a well-rounded knowledge of the food industry and business-to-business research content. Her background includes an editorial role at Convenience Store News magazine, and she has worked for Nielsen, the USA Today Network and Bauer Publishing.
Sarah is currently working on her MBA at Rutgers University. She can be reached at email@example.com to talk about anything food-related.
There are no comments, yet. Why don't you add one?
10 Mountainview Road
Upper Saddle River, NJ 07458
Food Institute reps are available to answer your questions
BECOME A MEMBER
For close to 90 years, The Food Institute has been the best "single source" for food industry executives, delivering actionable information daily via email updates, weekly through The Food Institute Report and via a comprehensive web research library. Our information gathering method is not just a "keyword search."