Amazon’s Whole Foods Acquisition: What it Means for On-Demand Services and Grocers

The world’s no stranger to on-demand services—not anymore, at least. With the pervasiveness of services like Instacart, Uber, and Postmates, we’re becoming more comfortable than ever entrusting our daily needs to cloud-based platforms that outsource our more banal tasks to runners, drivers, and delivery people.

The Amazon’s Whole Foods Acquisition:

Amazon has cornered the online shopping market with the Amazon’s Whole Foods Acquisition through its Amazon Prime service, which offers two-day shipping on hundreds of thousands of items from its marketplace. Its Prime Now same-day household item delivery service further capitalizes on the instant delivery trend; a natural byproduct of the move towards on-demand everything is the recent acquisition of Whole Foods by Amazon.

By acquiring Whole Foods, Amazon is undoubtedly looking to expand its delivery services to offer groceries on demand, much like the Instacart service, which allows users to shop for grocery items online and receive them within hours, all without the purchaser stepping foot in a brick and mortar store. Amazon’s take on the concept is likely to mimic its fulfillment centers, using Whole Foods locations as physical grocery warehouses that can be shopped online and delivered by Amazon.

The digital giant has benefited greatly from the economy of scale as well as the economy of scope. Once an online book retailer, the addition of fulfillment and distribution centers, Prime and Prime Now delivery services, server farms and self-hosted apps has expanded Amazon’s footprint enormously. By streamlining its delivery processes over time, Amazon is able to lower prices by providing a one-stop shop for consumer needs; by scaling its services to meet market needs and align with the trend towards on-demand services, the retailer can (almost) guarantee its future success. Barring a series of serious missteps (or entire infrastructure collapse), Amazon is on track to continue being the leader in online retail across many consumer verticals.

What does this mean for Whole Foods, which is known for its generous employee benefits and focus on organic, sustainable grocery items? In a filing with the Security and Exchange Commission (SEC), Whole Foods CEO John Mackey said: “I can’t say there’s not gonna [sic] ever be any changes. Because you already know we’re evolving…we will be joining a company that’s visionary…[which was] ranked the number-one most innovative company in the entire world.”

Mackey went on to allude to some of the changes that could be expected in the future, including reducing costs and improving service, as well as the potential addition of non-Whole Foods brands, which would be a departure from Whole Foods standards. He admits that the particulars of the plan cannot be disclosed until the deal is solidified, but does make note that employees can expect a technological evolution and an expectation that individuals will be able to grow beyond their roles at Whole Foods, into new opportunities at Amazon.

What the future will truly hold for these two brands, only time will tell. But for now, other grocers and grocery delivery services should be keeping a wary eye on Amazon, and seek to learn from their journey into this new realm. Contact DoubleHorn if you have any questions or comments

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