The impact of Amazon’s Whole Foods acquisition? We asked RSR Research.

Amazon’s $13.7 billion acquisition of Whole Foods last month has been billed as “the deal that forever changed retail,” which promises to have far-reaching effects on retail and, especially, on the technology that is used to manage retailers’ operations.

Brian Kilcourse

Retail Systems Research, or RSR is an American market intelligence company focused on the impact of technology on the retail industry.

We sat down with RSR Research Managing Partner, Brian Kilcourse, to discuss Amazon, their current direction, and its implications for retail, technology, and how it all comes together to define the customer experience.

So, Amazon is now a grocery retailer?

Beyond being an e-retailer, Amazon is three things: a technology company, demand aggregator, and a supply chain. Because of how they deliver value to the customer, technology is at the center of what they do. With the acquisition of Whole Foods, Amazon will force the grocery segment to finally accept that omni-channel retailing is real.

Grocery, or more generally, Fast Moving Consumer Goods, is the last vertical in retail to see the importance of a harmonized digital and physical selling environment. To the extent that a grocer has a digital channel, customer orders might be initiated on the digital side and fulfilled at the store – that’s the end of it. You don’t see much evidence of a harmonized selling environment on the sales floor. So, Amazon is forcing grocery retailers to really tackle this head on for the first time. It moves technology into the physical selling environment, where in the past, most of it has been dedicated to the checkout line.

Amazon is pushing grocers in two ways: to make information technology a prominent feature of the shopping experience, and to get beyond being purely low-cost providers of food.

What changes to their experience should shoppers be expecting when visiting a Whole Foods store?

There will likely be several changes. Today, I might be shopping in Target, Best Buy, or another similar store, and I want information about a product. Nine times out of ten, I’ll get my mobile device out and go to Amazon to look for it, even if my intention is to buy the item in whatever store I’m in. I’m checking two things when I do this. First, to make sure that the price is “fair,” and second, I’m looking at reviews and product features. Let’s imagine we could close that loop! Amazon can do that for customers in a Whole Foods store. Wouldn’t that be a good thing?

It also gives them a way to automate the routine nature of our orders. Customers can trigger orders automatically online, even if they intend to pick them up in the store – that’s not unique anymore. But we could also go the other way, we could extend our routine purchases to include items and even whole categories of merchandise that aren’t available in the store but we’d like to have anyway. So, it gets to the endless aisle idea while in store. Amazon would be very good at that.

So, I think changes will be bidirectional, in terms of making the store experience richer in one sense and extending the store into the virtual space. It’s a win/win for Amazon and Whole Foods.

What about technology for store associates? After all, in Amazon Go there aren’t many.

At Whole Foods, store associates are an important part of the shopping experience. I expect Amazon will arm them with better technology to help them better serve their customers, and there’s likely going to be some connection with what’s available from Amazon. So, while a customer is shopping in the store, there’s also an opportunity for store associates to make customers aware items that are only available online, whether groceries or other related items.

Also, everybody’s thinking that maybe, since Whole Foods doesn’t have a loyalty program, Prime is something that will potentially be rolled out to them. I came across an interesting statistic related to this that said 70% of Whole Foods shoppers are also Amazon Prime members!

How will other grocery retailers respond?

The Whole Foods acquisition allows Amazon to come to the sales floor as part of the total service offering of the grocer, and it also allows the grocer to take advantage of Amazon’s extended services. And because the technology can do it for the customer, it can also do it for the employee. Suddenly the barriers to compete in the grocery space will have significantly increased. The game just changed for retail, and especially grocers, who are vulnerable to this because they are notoriously hesitant when it comes to putting technology on to the sales floor.

Ultimately it will force grocers to join the omni-channel revolution, they have no choice. And a big part of that is putting technology into the hands of, not only customers, but also employees who are servicing customers and are part of their shopping experience in the physical store environment.

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