Amazon.com makes a huge brick and mortar play on the grocery segment by acquiring Whole Foods Market for $13.7 billion, giving it a sizable footprint across the country. The acquisition of Whole Foods validates the growing adoption of eGrocery, enabling its current customers to order groceries online and pick up in their local store.
What does this mean for grocers?
Clearly it puts to rest all the questions pertaining to the efficacy of the eGrocery concept, or the need for grocers to have an online offering. The eGrocery model just became table stakes for grocers.
Just last year Wal-Mart acquired Jet.com giving the concept its first nod of approval. Amazon’s acquisition of Whole Foods rings the bell loud and clear.
Physical stores are VITAL to any eGrocery business model. Americans do not want to feel like their food comes from a warehouse or an assembly line. Amazon has already been offering grocery delivery to its customers and was in the process of building out a network of local stores for this very reason. Consumers prefer buying from a physical and local store when it comes to food and diet. eCommerce is different than eGrocery, it depends more on trust and quality. The Whole Foods brand has one of the highest customer ratings for trust and quality. Amazon basically purchased trust. Amazon buying Whole Foods is a lot like a newly rich tycoon marrying into royalty to buy stature and respect within the community. It gives them immediate credibility as a premier, high quality grocer.
Let’s not forget the technology angle of this venture. In purchasing Whole Foods, Amazon now has a share in Instacart, a grocery delivery service, as Whole Foods was one of its largest customers. It is too early to say what will happen with Instacart but imagine if what would have happened if Yellow Cab tried to acquire UBER five years ago? Even if Instacart survives, grocers should see that they need to own eGrocery internally rather than outsourcing it. If they want to earn and keep their customer’s trust they should be reticent about partnering with Instacart or Amazon Fresh.
eGrocery is likely going to grow into a double digit share of the grocers’ revenue in the next couple of years. It seems clear that grocers, now more than ever, MUST offer an eGrocery shopping experience if they wish to survive. They must internally own their eGrocery business from start to finish and they are going to need the marketplace to offer technology, operations, and thought leadership in order to complete moving forward.
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