What Amazon’s Acquisition of Whole Foods Means for Retail

Amazon’s recent $13.7 billion purchase of Whole Foods has many wondering how the retail world will be impacted. Smart retailers are keeping an eye on the ecommerce giant to see what can be learned, accomplished and perhaps copied as Amazon applies its digital expertise to the brick and mortar world. While marketers everywhere anxiously await the changes that Amazon will undoubtedly bring to the grocery shopping experience and the retail industry at large, here are three immediate takeaways from the announcement.

Loyalty Matters

Amazon has announced that its industry-leading Amazon Prime subscription service will be extended to Whole Foods, which means that the world’s largest loyalty program is about to get even bigger. This extension of Prime enables Amazon to increase consumer value and drive even greater loyalty by providing additional member benefits. For example, consumers will now be able to access Amazon rewards when shopping at Whole Foods, receive exclusive members-only deals on Whole Foods products, and pick up online orders at an Amazon locker in the local Whole Foods store. The extension of Prime into brick and mortar will finally give Amazon data and insight into consumer behaviors in the physical world, complimenting the in-depth digital customer profiles that it has developed and refined over the last two decades.

Amazon isn’t the only retailer that has embraced the importance of a compelling loyalty program. Both Starbucks and Walgreens have excelled at making their loyalty programs an indispensable part of the brand experience. And by enabling their loyalty programs with powerful mobile apps, these leading retailers have simplified the buying process while also rewarding customers for their loyalty, no matter where or how they choose to shop.

To win the battle for market share and customer loyalty, retailers must continue to invest in programs and capabilities that create greater value for consumers. Whether it’s rewarding shoppers for increased frequency of store visits, offering new in-store services such as personal consultations and technical support desks, or delivering more engaging shopping experiences powered by indoor mobile location, brick and mortar retailers need to find ways to differentiate themselves in an increasingly crowded space.

Personalization Is Going Omnichannel

Amazon has long been the leader in online personalization, but until now, they have had one of the same challenges as traditional retailers: a lack of visibility into physical world shopping behaviors. With the acquisition of Whole Foods, Amazon can now add valuable real world insights to its understanding of customer needs and preferences. Other ecommerce leaders such as Bonobos and Warby Parker have also moved into the brick and mortar space, opening stores in order to create new opportunities for consumer engagement and the ability to deliver even greater levels of personalization.

For traditional retailers like Urban Outfitters, who already have an established brick and mortar presence, investing in new technologies like indoor mobile locations has provided a powerful new way to connect the physical and digital worlds, enabling them to personalize their outreach across every channel. Nordstrom is another traditional retailer that has invested in omnichannel personalization. It recently announced plans to arm store associates with shoppers’ online browsing history in an effort to provide a more personalized in-store experience.

Consumer expectations for enhanced personalization have increased for ALL retailers, and those who want to remain competitive must invest in capabilities that allow them to better understand and act on consumer behaviors across all channels.

Better Move Quickly

Amazon’s growth trajectory has been staggering. While annual sales by major retailers have remained steady since 2010, Amazon’s total sales have increased by 800% during the same time frame. Their purchase of Whole Foods is sure to bring about a new set of capabilities, leading to even more disruption within the retail industry. Retailers who aren’t prepared to react swiftly to this disruption will likely face the same demise as once-leading retailers like Circuit City, Radio Shack, Borders, Sports Authority and Toys R Us. If today’s retailers take away just one key message from Amazon’s Whole Foods acquisition, it should be “speed is of the essence.” Retailers need to double-down on strategies that are working, ditch those that are not and invest in new capabilities to meet the evolving needs of today’s savvy shoppers.

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