Amazon, Whole Foods and 3 key concerns for Canadian grocers
Amazon’s plan to acquire Whole Foods is a blockbuster move that gives the online behemoth significant capability and credibility to compete in fresh grocery. At USD$15 billion in revenue last year, Whole Foods as a division is bigger than Amazon Web Services.
Given that Whole Foods operates about a dozen stores in Canada — its largest footprint outside the U.S. — we see three key impacts about what the acquisition means for Canada’s grocery landscape:
Amazon will bring Whole Foods’ quality natural proposition to a much bigger audience
In 2016, only 4% of all primary grocery shoppers shopped Whole Foods for food or consumables in the past three-month, according to Kantar Retail Canadian ShopperSpective data. In contrast, 18% visited Amazon.ca for groceries and consumables over that same period. With a bigger audience and wider reach through national delivery, Amazon will open up the Whole Foods proposition (such as its 365 private label) to a much larger audience.
Amazon will raise shoppers’ expectations for delivery speed and value for money of natural items
Amazon’s same-day or one-day service is available in Toronto, Vancouver, Calgary, and other major markets. Most natural grocery retailers aren’t known for their speed of delivery or technical sophistication. This speed combined with Whole Foods distinctive assortment will give Amazon an edge.
Since Amazon is famous for its price matching and enabling online comparison shopping, its prices of national and Whole Foods private label consumables may reset shoppers’ expectations for the cost of natural and organic items — thus raising the stakes online and in store for quality wellness players, including Well.ca and Sobeys.
There is no question that Canadians want online grocery options. According to 2017 Kantar TNS data, 69% of shoppers are interested in buying their food and consumables online; among 25- to 34-year-olds, the interest level rises to 85%. This result indicates online grocery is an important piece of how the next generation of families is looking to shop. Competitors including Metro, Save-On-Foods, Loblaw and Walmart are already investing to build out their online grocery services. The stakes to assert these capabilities just escalated.
Whole Foods will help Amazon broaden its Prime footprint
Amazon uses Prime memberships to drive lifetime shopper loyalty. While Prime’s reach in Canada today is paltry compared to its reach in the U.S., it is growing as Amazon adds new services such as Prime Video and same-day delivery. Whole Foods will make it easier to introduce more Prime-exclusive consumables touchpoints. For instance, watch for Prime Now, Amazon’s two-hour on-demand delivery service to appear in Toronto and Vancouver. It may also look at adding AmazonFresh grocery pickup service under the Whole Foods banner or click-and-collect services at Whole Foods stores. In widening Prime’s reach, Amazon’s authority across categories and trip types will also grow.
For a deeper discussion on this acquisition and other shifts in the Canadian retail landscape, join us at Kantar Retail’s Canadian Retail Conference, Sept. 13 in Toronto.
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