This is part of Supermarket News’ 2017 Disruptors package. See the entire lineup here.
There are still more questions than answers about how Amazon will leverage its $13.7 billion acquisition of Whole Foods Market, but no matter what specific strategies the company deploys, it’s bound to have a disruptive influence on the industry for years to come.
One of the uncertainties about the new arrangement is how much influence John Mackey, the iconoclastic and often controversial co-founder and CEO of Whole Foods, will have at the chain going forward. When the acquisition was completed in August, Amazon noted that a longtime executive at the e-commerce giant, Steve Kessel, would oversee the segment of Amazon that now includes Whole Foods.
Kessel has overseen several Amazon ventures in his time with the company, including the development of its Kindle e-reader and Fire tablet. He had taken a sabbatical from Amazon between 2012 and 2015, and recently has been overseeing the company’s tests of the Amazon Go convenience store and its physical bookstore locations, as well as AmazonFresh, the grocery-delivery service Amazon has been slowly rolling out across the country.
In November the company eliminated the AmazonFresh offering to some areas, a move some observers saw as a step toward the integration of Whole Foods into the grocery delivery operations under Kessel. Recent reports said that Amazon has moved its Prime Now service, which offers delivery in as little as two hours, under Kessel’s purview as well. Some analysts have speculated that Prime Now could become the grocery delivery service for Amazon, using Whole Foods stores for order picking.
In fact, Brian T. Olsavsky, Amazon’s chief financial officer, hinted at potential further integration of Amazon’s two-hour delivery service with Whole Foods in a recent earnings call.
“I think over time, you'll see more cooperation and working together between AmazonFresh, Prime Now and Whole Foods as we can explore different ways to serve the customer,” he said.
Whole Foods is already contributing significantly to Amazon’s legacy food delivery business by offering its 365 private label brand through Amazon.
Pricing is another key area where Amazon could potentially make a huge impact on the industry, if it can succeed in using its world-class logistics expertise to erode Whole Foods’ reputation for gobbling up “whole paychecks.”
It remains to be seen how Amazon will leverage its Prime membership program to drive Whole Foods traffic and potentially lower prices. Prime members, who pay $99 per year for free next-day delivery and other services, are estimated to number about 80 million. Amazon has said it plans to use Prime as a loyalty program at Whole Foods.
Although Mackey at first described Amazon as the perfect partner for Whole Foods, which was a facing a shareholder revolt when the acquisition was announced, he has been quoted since the acquisition as saying that his team was having some difficulties adjusting to the culture of the new parent company.
It could be that Mackey’s colorful history as one of the biggest disruptors the industry has ever known are coming to a close.
