How Discount Grocer Lidl Can Build Store Traffic Following US Launch

After experiencing a favorable introduction for its first 20 U.S. grocery stores in , German discount chain Lidl has been trying to establish its footing as it continues its East Coast expansion.

According to analysis by proximity platform inMarket, the dip in foot-traffic Lidl has seen at some of its stores in North Carolina and Virginia is afflicting others in the discount grocery space as Walmart ramped up its challenge against Amazon’s Whole Foods and Target.

Finding Traction

Lidl, which runs over 10,000 stores across 28 countries, “launched with a bang” this past June 15th, inMarket’s report notes. The company’s U.S. stores drew a decent 2.6 percent Share of Visits (SOV, as inMarket abbreviates it) on its introduction to the U.S. market.

The U.S. launch by Lidl appeared to take customers from another discount retailer BI-LO, which saw a decrease in visits from May to June, inMarket says. North Carolina- based Harris Teeter, which is a subsidiary of supermarket chain Kroger, also lost SOV in June, suggesting that consumers went to compare shopping at Lidl. (We’ve reached out to Lidl’s PR department and will update accordingly.)

Lidl saw an initial burst of store visits in the US this summer, but traffic has since declined.

But rather than cannibalizing the direct competition, inMarket points to Walmart’s gravitational pull as representing the biggest problem smaller supermarkets are facing, as the retail giant attracts about 30 percent of grocery visits.

“Many of those visits [to Walmart] are likely to involve grocery purchases,” inMarket says. “It’s interesting to note that Walmart dropped from 30 percent SOV in May to 29 percent SOV in June — perhaps as its cost-conscious shoppers went to check out Lidl. Fellow mass merch chain Target remained at from May to June at 9.3 percent SOV in these markets.”

Conquesting Reconsidered

Despite Lidl’s sudden rise, and its direct rivals’ dip in visits around the time of its debut, BI-LO, Walmart and Harris Teeter have all recovered SOV as of September, inMarket notes.

“It’s still very early for the retailer, so there’s definitely potential to turn things around,” inMarket Communications VP Dave Heinzinger tells GeoMarketing. “From our perspective, we know that location-based digital ad programs can help offline retailers drive foot traffic into stores.”

One area for Lidl US to explore is managing the digital presence of its growing network of American locations. Ensuring that consumers have the right discovery tools associated with digital presence management — nearest addresses for online searches, store hours, contact details, and reviews — could quickly expand its initial customer gains.

Heinzinger is interested to see if Lidl could make an impact by targeting competitive shoppers via smart, location-based retargeting programs. (For the record, Lidl does not employ inMarket, which relied on location data from the 50 million consumers who use the company’s partner apps).

“For example, our data shows that BI-LO and Walmart had dips in SOV during Lidl’s launch in June, while Whole Foods did not,” Heinzinger adds. “A top-line recommendation might be to focus on their strongest audience — the cost-conscious shopper — by conquesting BI-LO and Walmart shoppers through online-to-offline retargeting. They might also skip wasting dollars/impressions on uninterested Whole Foods shoppers.”

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Who Should Walmart And Amazon Acquire Next?

As Walmart and Amazon rush to build up their respective online/offline commerce strategies, it’s safe to say that key acquisitions will play a part in efforts to keep pace, if not out-pace, the other as “the ultimate retailer” in consumers’ minds.

For example,  within the last three months, Amazon made its $13.7 billion bid to acquire Whole Foods, while Walmart bought e-commerce platforms Jet and Bonobos, speculation swirled around these two retail behemoths each striving to become the ultimate shopping destination—both on and offline.

Foursquare has come up with a list of some obvious acquisition targets that would fit Walmart’s and Amazon’s intersecting and unique needs in their drive towards retail hegemony.

But by basing its selected brand targets based on its foot-traffic data covering 2.5 million Americans, Foursquare CEO Jeff Glueck makes the case for where the best complements exist for each company in a blog post.

“Amazon and Walmart would both be wise to consider Nordstrom and Warby Parker,” says Glueck. “Amazon should consider Lowe’s; Walmart should look to Ulta Beauty.”

Among the analysis of each brand’s needs according to Foursquare:

  • Amazon prefers brands that foster an even deeper relationship with its current shopping base, and investing in challenger brands that are smaller and more upscale than in-market competitors
  • Walmart is playing catch-up in e-commerce, and so is looking to broaden its consumer reach and digital footprint, and develop delivery efficiencies.
  • Both companies are interested in attacking verticals that have proved resistant to e-commerce penetration.
  • Both companies want to refine and experiment with a “showrooming” strategy. They are also both interested in the same consumer: high-net-worth GenX and Millennials.
Source: Foursquare

Target Number 1: Nordstrom

If Amazon and Walmart aren’t fighting over Nordstrom by now, perhaps they should, Glueck says.

Amazon, in particular, needs to connect with the “right shoppers” in the physical world. And considering Amazon’s instant-pickup is initially limited to the 22 locations it began opening in 2015, it needs to expand its placement to actual stores beyond its Whole Foods connection.

“Amazon’s latest acquisition, Whole Foods, and Nordstrom have an overlapping customer set: Foursquare’s data shows that Nordstrom shoppers are almost 2X more likely to shop at Whole Foods than the average consumer,” Glueck says. “So an Amazon-owned Nordstrom chain would deepen Amazon’s relationships with its expanding core base.”

For Walmart, acquisitions are intended to bring in new customers. Nordstrom and its discount subsidiary Nordstrom Rack would likely broaden Walmart’s base to more upper middle income shoppers.

“[Nordstrom] consumers aren’t frequent Walmart-goers,” Glueck says, citing Foursquare’s foot traffic data showing they are about 55 percent less likely to go to Walmart than the average American.

“What Nordstrom does have is a bona-fide track record as well as a healthy concentration of Millennials and females, a nice addition for Walmart to balance out the the purchase of Bonobos, which has a wider male reach,” he says. “Walmart has to pursue familiar verticals that have deep online footholds. And Nordstrom has seen tremendous success versus comparable retailers in developing its e-commerce presence.”

As for Nordstrom Rack, it tends to rank number two in store visits and sales after the discount category leader T.J. Maxx.

“We found that Nordstrom Rack has actually lost more than 2 percent of its visit share to competitive discount retailers in the last two years. Amazon’s ability to slash prices further could lift the competitor brand, and give Amazon a strong foothold into the brick-and-mortar discount market. Imagine if everyday was Amazon Prime day at Nordstrom Rack…”

Source: Foursquare

All Eyes On Warby Parker

Showrooming — the act of comparing prices and products on e-commerce site at the same time one is browsing in a physical store — is the scourge of all brick-and-mortar retailers. And that’s largely thanks to Amazon’s all-encompassing inventory.

Since Warby Parker started its eyeglass sales as an e-commerce platform, it has used its online-only origins to help develop a strategy to combat showrooming at its 46 boutiques. Plus, Warby Parker is currently planning to open 25 more shops, a clear indication that its clicks-to-bricks program is working.

An Amazon purchase could further enhance Warby Parker’s distribution, while reducing its shipping costs.

Plus, consider Warby Parker’s strength with Millennials — over half its shoppers (55 percent) are in that age demographic, which over-indexes at luxury brands including Bloomingdales, Williams Sonoma and Lululemon according to Foursquare data.

Moreover, Warby Parker has similar shopper profiles and significant customer overlap with Whole Foods, as Foursquare data shows that 80 percent of Warby Parker customers also shop at Whole Foods.

Walmart certainly desires those Millennials and by acquiring Warby Parker, it would continue to trajectory its been on with the purchases of Bonobos and Jet.com — two very different offerings from Walmart’s typical shoppers.

“Though we’d expect Walmart to keep Warby as a stand-alone brand, if Walmart ever needed an infusion of new shoppers and/or Millennials into its stores, one way to do so—and quickly—would be to add Warby Parker services and eyeglasses into Walmart’s existing vision centers,” Glueck says. “In addition to being more than half Millennial, Warby Parker customers are 80 percent less likely to visit a Walmart versus the average American—so they’d be fresh eyes on Walmart’s existing inventory.”

 

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How Many New Customers Will Amazon Gain From Whole Foods Acquisition?

Amazon acquired Whole Foods for $13.7 billion last month in a move aimed at solving Amazon’s grocery ambitions as well as addressing Whole Foods’ lagging tech — but how many new customers are Amazon and Whole Foods actually set to gain from the acquisition, respectively?

According to research from 1010data, the move is set to benefit both companies from a consumer spend perspective beyond just the delivery and technology benefits that the acquisition conferred: The 19 percent of Whole Foods customers who don’t shop at Amazon creates an estimated five percent increase in net new customers for Amazon right off the bat.

Prime Members Spend More

“In examining customers who shopped more than once at Whole Foods from June 2016 – May 2017, we found that 81 percent of Whole Foods shoppers are already customers of Amazon,” 101data’s report states. “On the flip side, 29 percent of Amazon’s customers also shop at Whole Foods. The 19 percent of Whole Foods customers who don’t shop at Amazon creates a five percent increase in net new customers for Amazon after the acquisition. On top of that, of all Whole Foods shoppers, 52 percent are Prime members — meaning half of Whole Foods’ customers are already regarded as key Amazon shoppers.”

Additionally, Prime members tend to spend more at Whole Foods, according to the report — so as Amazon continues to acquire more Prime subscribers, it should be a spending boon to both entities, which is another factor that may have influenced Amazon’s acquisition decision.

And as far as Amazon’s professed grocery delivery ambitions? Whole Foods shoppers reportedly have a higher propensity for online grocery shopping, with 10 percent of Whole Foods customers having used an online grocery delivery service in the past 12 months; for comparison, only 5-6 percent of Albertson’s and Kroger’s customers bought groceries online in the same period, which “makes Whole Foods shoppers desirable for a company like Amazon that’s trying to expand their grocery delivery footprint,” the report concludes.

It will take time to for the full benefits of the acquisition to materialize: How (and how soon) will Whole Foods’ traffic — both in terms of its physical stores and its online delivery orders — increase under Amazon’s ownership? But in the meantime, it’s clear that both Amazon and Whole Foods are set to experience initial growth from the new consumer base outside of their current overlap — and that, as Aisle411 CEO Nathan Pettyjohn put it at the time of the acquisition, “with physical store purchases still accounting for nearly 90 percent of all retail transactions even after a decade of e-commerce growth, Amazon realizes that continuing large-scale growth over the next 10 years as a company will require capturing a big slice of the physical store purchasing market — so as long as Amazon can make do with higher margins and less overhead than traditional retail stores.”

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Walmart Paves The Way For Grocers With Higher Paid-Search Spending

In addition to its recent acquisitions of e-commerce platforms Jet.com and Bonobos, Walmart is already fighting back against Amazon’s burgeoning challenge in brick-and-mortar grocery space, as the Bentonville retail giant led all paid search advertisers in spending over the past year, a study by marketing platform AdGooroo found.

Walmart’s search spending jumped by more than 1,500 percent from 51,000 to an estimated $858,000 on “on 124 non-branded grocery store and grocery delivery” keywords in Google search from June 2016 through May 2017, AdGooroo said. Among the terms covered in AdGooroo’s analysis were  “grocery store,” “groceries delivery,” “grocery delivery service,” ‘online grocery shopping” and “supermarket.”

The retailer’s moves seemed to coincide with other efforts to support its position as the nation’s largest grocer. In addition to its purchase of Jet.com, Walmart has struck delivery partnerships with Uber and Lyft. It’s also expanded its curbside grocery pickup service as many other retailers have, such as Target.

The sudden and significant rise in Walmart’s search spending could also be a sign of Jet.com’s influence on the retailer, which Walmart acquired in September last year, spent an additional $82,000 on the keyword group during the period, up from just $3,000 in the 12 months preceding June 2016.

Aldi Follows Walmart

Right behind Walmart in AdGooroo’s paid-search rankings among grocers was Aldi, with $441,000 spent on the keyword group.

As the German supermarket chain expands its U.S. stores from 1,600 to 2,500 by 2022, its paid-search expenditures were up from $40,000 over the 12-month period.

Interestingly, Aldi averaged just $9,000 per month in spend on the keyword group from June 2016 through February 2017. Like Walmart, the chain’s spending surge appeared to be in concert with its other strategic moves, particularly when it comes to ensuring a stronger online presence in preparation for U.S. expansion roadmap.

In general, grocery brands’ invigorated SEO shift mirrors wider market moves designed to capitalize on the importance of social media channels like Snapchat and mobile micro-moments consumers turn to when it comes to making shopping decisions.

Where’s Amazon In All This?

Overall, AdGooroo found that Walmart captured a 19.1 percent share of total clicks on the 124 non-branded grocery keywords over the 12-month period, followed by Aldi (11.6 percent click share), Kroger (7.6 percent click share), Safeway (6.7 percent click share) and Fry’s (4.2 percent click share).

“Although the same top five retailers for ad spend also ranked in the top five for click share, Kroger and Safeway swapped places, showing that Kroger had a more efficient campaign than Safeway, since it spent less and received a larger share of clicks on the non-branded grocery keywords,” AdGooroo’s report said.

As for where Amazon was in all this paid-search activity, Amazon ranked 9th in AdGooroo’s ad spend survey on the non-branded grocery keyword group with $134,000 in spending from June 2016 through May 2017. Amazon also came in 9th in terms of clicks with a 2.8 percent click share.

Its acquisition target, Whole Foods, which has struggled technologically for a while, ranked 18th in ad spend with $51,000 spent on the keyword group over the last year. That represented a decrease for Whole Foods from the $57,000 the company spent on the same keywords from June 2015-May 2016 — and dismal 19th in clicks with a 1.2 percent click share.

In a separate study of retail sales growth by the National Retail Federation and Kantar Retail, Walmart’s ramped up search focus could have played a role in keeping it in the top spot.

“At 55 years old, Walmart may be the oldest new kid on the block, but it still has the energy and mindset of a startup as it continues to successfully battle the competition,” said Stores Media Editor Susan Reda said. Stores is the official publication of the NRF.

While main tale associated with retail these days seems to be one of retrenchment and struggle, as major brands like Macy’s and JCPenney shutter dozens of outlets, the NRF/Kantar Retail study sought to shine a brighter light on an industry taking steps to address omnichannel demands from consumers.

Retailers will always be measured by sales numbers, and ranking the leaders is important,” Reda said. “But so are the stories behind the numbers — it’s those stories that bring the Top 100 to life. The nation’s largest retailers are posting strong vitals. They’re embracing creative disruption, reinventing physical stores as places for brand experiences and exploring new ways to connect with the consumer.”

Considering that 90 percent of consumer transactions happen in a physical store, and that the majority of that that 90 percent is focused on grocery purchases, the challenge for independent markets and chains will rest on how well they play the SEO game, especially as the rise of voice-activated, Connected Intelligence assistants like Siri and Alexa are poised to have a greater impact on the answers consumers receive to their spoken search queries.

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Wisconsin Startup Points The Way For Grocers To Challenge Amazon/Whole Foods Onslaught

Even before the looming prospect of a combined Amazon and Whole Foods upending the grocery space, supermarket independents and chains alike appeared to be ready to meet consumers’ desire for crafting seamless online/offline shopping experiences.

As eMarketer has noted in its look at e-commerce grocery shopping, the number of consumers who purchase groceries digitally will rise significantly this year. Citing research from retail marketing and analytics software company Unata and consultancy Brick Meets Click, close to one-third (31 percent) of U.S. internet users said they were “very likely” or “somewhat likely” to buy groceries online in 2017—up from 19 percent in 2016.

While much of the focus on the broader on-demand delivery space has tended to revolve around what is happening in major cities like New York and San Francisco, GrocerKey has been ramping up its work with grocers in its native Wisconsin for the past two years.

With online grocery sales expected leap 355 percent to $123 billion by 2023 from  $27 billion in the U.S. in 2014, according to Brick Meets Click, it’s clear that the marketplace won’t belong to one player. And that’s what GrocerKey is planning for,

In essence, GrocerKey is a white label solution for grocers that want to create their own e-commerce shopping platform and operate it under their own brand name, as opposed to relying on a third party like Instacart or Postmates.

GrocerKey’s main client — and lead investor — is Janesville, WI-based Woodman’s Market, which runs 18 stores across the state and in northern Illinois.

The Madison, WI-based startup’s grocery focus goes back almost 10 years, notes CEO and founder Jeremy Neren.

“I ran an online on-demand grocery delivery service in Madison, WI for close to a decade. That led up to starting GrocerKey. We warehoused the product ourselves for over 8 years. I had a strong desire to expand that business, and in an effort to make the business more scalable, I shifted the operation from a warehouse model to operating out of a local grocery store and leveraging their inventory. That local grocery store happened to have their own e-commerce platform powered by the market leader in white label e-commerce grocery technology.”

Duly inspired, Neren and his team pivoted into starting GrocerKey and began pitching local grocery retailers.

“In early 2015, we were able to partner with Woodman’s Markets, the largest grocery chain in Wisconsin,” Neren said. “They not only contracted with us to use our technology, but licensed us to help them physically build the business on their behalf. Woodman’s also invested about $2.1 million in GrocerKey and they are our lead investor.”

In addition to Woodman’s, GrocerKey has recently signed up three other supermarkets on top of its 11 existing retail partners — Neren won’t disclose the names just yet. The company, which has over 100 employees, is planning to build out functions that will allow for its supermarket clients’ customers to blend online and in-store shopping.

GeoMarketing: On-demand delivery is generally viewed as concentrated in upscale, tech-centric, large cities. How would you describe the demand in Wisconsin and the Midwest for grocery delivery?

Jeremy Neren: No doubt about it – there is larger consumer demand for e-commerce grocery in other parts of the country. That said, the demand is increasing everywhere in all markets. We did 5,000 orders with an average $150 basket-size last month out of a half-dozen stores on ShopWoodmans.com and a small marketing budget. It’s all growing organically.

Every market has its own unique pull. In Madison and Milwaukee, you tend to have some awful weather for a substantial part of the year. That’s a natural driver of this business – people don’t want to go outside in zero-degree weather anywhere.

So we try to tailor services to the individual markets we’re in and see what makes sense for that individual retailer. This is definitely not a cookie-cutter approach.

What are the pain points GrocerKey solves for the markets you work with?

The biggest pain points we’re trying to solve for grocers in e-commerce is that their stores are designed for the brick-and-mortar environment, not e-commerce fulfillment. Right now, there’s a surplus of brick-and-mortar stores in the U.S. So retailers are motivated to get into e-commerce, for one, to leverage those existing stores. They don’t want to spend even more money to build a warehouse to develop a separate e-commerce business.

So the question is, “How do we take an inherently inefficient environment and create an efficient business on top of it?”

In many cases, retailers don’t often have great intel on exactly where products are in their store. So we create a “pick-path” in their store — then, when you’re assembling an e-commerce order, you’re using the most efficient path possible to shop for whoever is taking that e-commerce order. That allows the store to reduce labor costs and then ultimately provide a better value for the customer.

What are the issues GrocerKey solves for consumers?

The biggest challenge is out-of-stocks. As a consumer, if you don’t see the item you want on the shelf, you move on and grab another similar item. If you buy an item online and when it’s delivered, it’s not there, that’s a miserable experience.

How do you solve for that? We let the consumer choose a backup item in case their first choice isn’t available and we provide suitable backup options for staff that assemble online orders.

How do you help the markets you work with spur interest and usage of on-demand grocery delivery?

We are doing more work with third-party platforms to create adoption. We’re utilizing the strength of the retailer’s brand and providing them with a number of robust marketing tools that are built into our platform.

The role of Connected Intelligence and voice-activated search and ordering through Amazon’s Alexa, Apple’s Siri, Okay Google, and others is becoming mainstream. What impact will that have on the way people shop for groceries?

We’re bullish on the idea of voice-activation. E-commerce is all about convenience and removing friction when it comes to the shopping experience. Voice-activation and artificial intelligence advances that idea of convenience. It’s going to be an integral piece of e-commerce and shopping going forward. It’s already having an impact, as people are ordering groceries on Amazon now.

What do you think the Amazon/Whole Foods deal means for established grocers?

The Amazon deal demonstrates the need for grocery retailers to move faster in their digital efforts. There was already pressure to do so, given the rise in consumer demand and pressure being put on those stores by Amazon. So that pressure will only increase with Amazon having a nationwide brick-and-mortar presence to add to its arsenal of digital tools to reach consumers and bring them into their overall ecosystem.

It requires an entirely different operational approach than what Amazon is accustomed to, in terms of translating its e-commerce approach to serve customers in-store.

It’s also important to consider that strengthening your digital presence does not simply mean e-commerce, it means providing more touch points to reach consumers — e-commerce is a component of that, but you must also consider how to augment the in-store experience via digital touch points such as value added native mobile apps.

What’s next for GroceryKey?

We’re in the process of launching several retailers. And we’re trying to encompass more in-store shopping tools, so we’re becoming more of an omnichannel platform as opposed to a strictly e-commerce company. You can build your shopping list and give them the same item availability and pick-path information that we give to e-commerce shoppers. Eventually, that functionality will lead to mobile self-checkout within the store.

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How Amazon’s $13.7 Billion Whole Foods Acquisition Will Alter The Grocery Space – And Each Other

After shaking up the retail space for the past two decades, Amazon’s $13.7 billion purchase of Whole Foods represents the e-commerce giant’s latest and biggest move to dominate the grocery space.

Over the year, Amazon has shifted significant resources designed to challenge major retailers like Walmart and Target on the grocery front.

This week, Amazon Dash, the three-year-old device for immediate delivery of consumer packaged goods, has revamped its Amazon Dash Wand barcode scanner with the voice-activated digital assistant Alexa built into the device, Techcrunch reported.

December saw the opening of the prototype brick-and-mortar grocery store, Amazon Go, in Seattle. The Amazon Go concept allows customers to avoid the checkout line by simply walking in and leaving — as long as they have an Amazon Prime account that tallies the purchases automatically.

Amazon’s Challenge

“With physical store purchases still accounting for nearly 90 percent of all retail transactions even after a decade of e-commerce growth, Amazon realizes that continuing large-scale growth over the next 10 years as a company will require capturing a big slice of the physical store purchasing market — so as long as Amazon can make do with higher margins and less overhead than traditional retail stores,” Aisle411 CEO Nathan Pettyjohn wrote in GeoMarketing at the time of Amazon Go’s launch.

The purchase of Whole Foods, shows how Amazon plans to capture the the grocery space, leaving traditional markets scrambling more than ever to attempt to match its services and prices.

“The biggest challenge for Amazon now is that they offer so much choice,” says David Berkowitz, Chief Strategy Officer at marketing tech firm Sysomos. “For instance, there’s regular shipping, Prime, Prime Now, Prime Pantry, and Amazon Fresh. The same box of Famous Amos chocolate chip cookies costs $21 via regular shipping and $15.59 via Prime Pantry; these kinds of price differences are common. As Amazon grows more complex, it will need to find ways to become more streamlined, straightforward, and simple.”

In a conversation with GeoMarketing, Berkowitz related a discussion about Amazon with his parents last weekend. He tried explaining the differences among Prime Pantry, Fresh, and regular Prime. By the time he was done, “I had confused myself and essentially convinced them to stick with going to Costco.” (As a bonus, at Costco, you get the $1.50 massive hot dogs, he notes.)

“That there are now so many ways to order these products — website, mobile site/app, Amazon Smile (web/mobile), Dash, various Alexa-powered devices — adds to the convenience for customers — but only makes it more confusing,” Berkowitz says.

“Amazon will need to proactively address this,” he says. “Instead of making me compare how many packs of cookies are in each box and how many ounces are in each cookie, just show me that this same product is available a few different ways and has a few different costs.”

The Impact On Rival Grocers

Even as this deal has Whole Foods continuing to operate its 431 locations under its 37-year-old brand name, the combination of Amazon’s technology will be felt by consumers and rival grocers quickly. (As the Washington Post reports, investors in Walmart, Costco, Kroger, and Target felt the impact immediately, as shares in those companies fell as much as 13 percent with an hour of the acquisition’s news.)

But even smaller grocers, who have been buffeted by on-demand delivery from the likes of Fresh Direct and Instacart, will need to need to rapidly sharpen their own online/offline strategies.

“The Amazon deal demonstrates the need for grocery retailers to move faster in their digital efforts,” says Jeremy Neren, CEO of GrocerKey, a Madison, WI-based provider of e-commerce and tech services for local grocers and chains. “There was already pressure to do so, given the rise in consumer demand and pressure being put on by Amazon, that pressure only increases with Amazon now having a nationwide brick-and-mortar presence to add to it’s arsenal of digital tools to reach consumers and bring them into their overall ecosystem.”

Rival chains and independents should be thinking about finding partners that not only help them implement cutting edge technology, but also help them think about how to operate in a new environment such as e-commerce, Neren adds.

Furthermore, Amazon’s dominance of the voice-activated, Connected Intelligence space with the Echo’s Alexa. As these devices go mainstream, Alexa will certainly provide a direct line to grocery purchases to Whole Foods, placing even more pressure on rival grocers to also find a way ensure Alexa connects them to customers as well.

“It requires an entirely different operational approach than they are accustomed to operating in to serve their customers in-store,” Neren says. “It’s also important to consider that strengthening your digital presence does not simply mean e-commerce, it means providing more touch points to reach consumers — e-commerce is a component of that, but you must also consider how to augment the in-store experience via digital touch points such as value added native mobile apps.”

Can Amazon Bring Efficiency – And Lower Prices – To Whole Foods?

Whole Foods Market first opened in 1980 in Austin. That was two years after its founders started a vegetarian grocery called SaferWay (a play on the general supermarket chain Safeway).

It wasn’t until the 1990s, when the idea of buying organic food caught on outside of bohemian enclaves and the company capitalized on the embrace upscale consumers were making towards buying products that were at least perceived as being eco-friendly and natural.

But after a spate of aggressive store openings and acquisitions, Whole Foods began to be a victim of two separate perceptions: one, that it was too high-priced for lower-income and mainstream grocery shoppers, and two, that it was failing to keep up technologically with its core upscale consumers’ desire for more on-demand and omnichannel shopping choices.

To address some of those issues, in 2015 the introduction of “365 By Whole Foods Market” represented an attempt to attract millennials with a combination of lower prices and app-based, in-store shopping services and loyalty discounts. But with only four outlets at this point, Whole Foods has clearly had trouble scaling that idea.

Bryan Eisenberg, co-founder of B2C marketing consultancy BuyerLegends and co-author of  Be Like Amazon: Even A Lemonade Stand Can Do It, expects the acquisition to solve Amazon’s and Whole Foods’ respective problems in the current grocery space.

“Amazon has been trying to scale its grocery business for years; it’s where so much of our retail spend is,”Eisenberg said. “Part of the problem for Amazon in that space is that to sell groceries, obviously, you need a local footprint.

“The challenge is that Whole Foods has struggled the last few years,” he added. They’re not a technology company. They’re not good at efficiency. But from a brand perspective, they’re still strong, though people do feel they’re overpriced. Amazon will be able to give those stores the technology boost that they desperately need, Eisenberg said. We have 365 By Whole Foods store near us in Austin. But they haven’t pushed that concept far enough.”

The Endless Amazon Loop

The release of the Dash Wand with Alexa, along with announcement that the Prime members who add funds from a bank account to an online gift card will get 2 percent cash back on any Amazon purchase in the form of rewards/points, which can then be used to purchase of more products sold through Amazon.

That ability to entice shoppers to stay within the Amazon shopping system, which includes streaming video and music, is based on the bottom line idea of efficiency, immediate sales fulfillment, and lower prices than any other shop.

“The merger of the two brands will be great in consumers’ mindsets,” Eisenberg said. “Whole Foods does command some brand loyalty – though many people gripe about it being Whole Paycheck – by bringing Amazon to that, the prices have gotten more competitive, but they haven’t been able to shake the idea that they’re an over-priced supermarket. Amazon was able to keep that great ‘people culture’ at Zappos. I think they’ll do the same with Whole Foods, improving the perception of both the culture and the price points.”

From books to electronics to CPG to groceries, the Amazon brand has always been  to allow a user to log-in to its site and apps and get personalized recommendations based on previous purchases. Suggestions are based on what the user searches, and what similarly profiled consumers bought when searching for those products.

“The number one thing you’ll see implemented ASAP: checking out at the register with Amazon Pay,” Eisenberg says. “That’s important because the problem with Whole Foods is that they don’t know if someone walking in is the most valuable customer or the least valuable customer. That’s the same problem Walmart’s had.

“Now, they’ll let people log into their Amazon accounts and they’ll be enabling the ‘endless shelf’ pretty quickly,” Eisenberg says. “Being able to check out and get the data on their customers will have an enormous impact on both companies.”

To realize the potential advantages of owning Whole Foods, Amazon needs to make buying groceries as easy as buying books,” says Berkowitz.

“I get that there are options with Hardcover, Paperback, Kindle, and Audible, so Amazon shows me pricing options, and delivery options too,” Berkowitz says. “Digital options arrive immediately, while physical options have their own delivery times and costs. Amazon now has to do for Famous Amos cookies what it does for John Grisham novels.”

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