How 365 brand could benefit from Amazon’s Whole Foods purchase

This topic aims to explore potential benefits of Amazon's Whole Foods purchase on its 365 brand

For $13.7B; Amazon could be getting 2 distinct companies!

Amazon’s $13.7B bid to purchase Whole Foods (WF) is seeing a flurry of analysis & speculations alike… from wall street analysts through to Retail pundits and even supply chain gurus this topic is unlikely to subside anytime soon. And why should it?

After all, in what could arguably be called one of the most disruptive acquisitions of this decade; Amazon could be getting 2 distinct companies in the one deal

The overall benefits of the deal could be dissected in more ways than one; but broadly speaking can be classified into 5 distinct but inter-connected categories :-

Key benefits of Amazon-Whole Food union - Connected Corners

This topic aims to take a closer look at the benefits the deal would bring to a specific segment365 by Whole Foods Market sub-brand

Bar any significant operational, omni-channel & procurement efficiency improvements; Amazon is expected to largely leave the Whole Foods brand alone

rendering a blank canvas in the form of the 365 brand for Amazon to experiment & perfect it’s broader retail ambitions; leveraging it’s laundry list of assets, platforms & innovations

But why 365?

Whole Foods & 365 brands have different duties to fulfill

The relationship is akin to any other premium vs. mass market model where Whole Foods brand would fulfill the niche high margin / high priced / premium / personable category… whilst the 365 brand capitalizes on the lower priced (private label) / good quality / high volume category with the added duty of building-up ‘future shopper loyalty to the overall Amazon/WF brands

Going way before the Amazon acquisition… a little over 4 quarters ago; facing intense competition from mainstream retailers & rival grocers in the organic & fresh produce segment; Whole Foods conceived it’s cost-conscious brand supported by predominantly private label products – the 365 by Whole Foods Market sub-brand

Despite it’s ‘whole-paycheck’ image; the main Whole Foods brand still appears to enjoy relatively high degree of loyalty from it’s (niche) established shopper base whilst it’s nationwide store footprint is still predominantly peppered across a mix of affluent, urban & millennial-centric neighborhoods

Thus 365 brand would help attract the rapidly growing “organic/health-centric BUT cost-conscious” customer segment without diluting the core Whole Foods brand… although; the turnaround strategy is being deemed slow by some investors & analysts

On the other side; Amazon knows private label well… in fact quite well… recent analysis from 1010data indicate sales from it’s Amazon Basics lineup (from AV cables to batteries through to diapers, pet supplies & even kitchen storage) are seeing high levels of success with many products scoring really high customer ratings as well

How could Amazon fit in?

The 365 brand is ripe for disruption & growth in the lucrative fast moving consumer goods category; particularly budget organic produce & grocery (we needn’t look past the rapid shift towards these organic product lines by almost every grocers & retailer in recent times)

There are many ways Amazon could enable the 365 brand to get a life of its own… and whilst the obvious thoughts wander towards Amazon’s famous Prime delivery & legendary supply chain optimizations… other initiatives such as automated store formats, touch-less checkouts & even in-store experience of emerging (related) product categories could just as easily help grow the 365 brand

How Amazon's purchase of Whole Foods could benefit its 365 brand - Connected Corners

Case Scenario: Store Format / Experience

Let’s say a key urban shopper data shows that milk, bread & bananas are the 3 most commonly shopped for items on weekdays between 5pm-7pm within a 3 mile radius around CBD

Whole Foods’ typically larger store formats are ideal for those lazy weekend shopping runs, allowing customers to shop at their own leisure &discover new lines of products & vendors…. though; these large format stores may not be suitable for an ultra-dense urban (expensive real estate) CBD environment; particularly when the bulk of the goods moved are relatively lower margin / fast moving SKUs

In this scenario various 365 formats (compact / store-in-store / kiosks / vending machines / virtual stores) would be perfect for the ‘grab & go’ crowd

Model #1: Multiple fully automated compact store formats

Multiple fully automated compact format 365 stores; strategically located at points-of-congregation (e.g. transit hubs) could enable customers in a rush to grab their products & walk out (a lĂ  Amazon Go) – No checkouts, No staff, No cash, No card… Simple!

Where as Whole Foods’ friendly checkout staff provide that personable interaction with a smile… 365’s fully automated (staff-less/touch-less) format would be an ideal fit for those 5:30pm weekday urban rush hour pickups

Model #2: Smart vending machines

Imagine 365 branded vending machines strategically located at transit points (train stations, bus hubs, et al.) that allow customers to dispense their required products, Pay via (Prime) e-wallet and run to catch their train

Model #3: Virtual Storefronts

Amazon’s infusion of it’s 1hr delivery platform could make quick work of ordering those essential SKUs right using nothing but the customer’s smartphone (QR codes, 1-click, virtual Dash button, Alexa, etc.) whilst on the train / bus and have them delivered to their door step before they even reach home (virtual storefront model)

In all of the above models, customer transactions are frictionless… i.e… take place through on the back of their dedicated account (perhaps Prime or Prime-esque)… that in turn allows Amazon/365 to not only improvise their operations with time but also have the right product SKUs available at the right time with surgical precision (Big Data / Predictive Analytics)

This retail revolution is just getting started, there virtually limitless strategic & operational scenarios that can be explored in great detail under this paradigm; some of which I hope to pace over forthcoming posts.

It goes without saying that expect detailed questions on this topic to dominate both – Amazon & Whole Foods’ forthcoming quarterly investor calls.

In the interim keep an eye out for deeper analyses dissecting various intent of purchase scenarios, future of groceries, competitive analysis, speculation on the future benefits, challenges and even touch upon the role humans would/not play in the future

Stay tuned!