Young & Affluent Shoppers: To Amazon, from Whole Foods

Though the last three months show no major impact on store footfalls at Whole Foods, here is why Amazon isn’t worried.

The story so far..

Earlier in June this year, Amazon announced it was buying Whole Foods for a whopping $13.7 Billion. Amazon announced a price drop on a large number of items at Whole Foods, starting August 28. As a result, the competitors followed suit. Target slashed prices on September 8, followed by Walmart.

While Whole Foods did see a strong increase in footfall starting August 28, footfall data from Near shows that the tactical measures by competing stores have so far mitigated the effect of the price drop.

To thwart Amazon’s big ticket purchase further, competitors are using legal options to limit Amazon’s plans of opening lockers in certain locations, delivery from Whole Food stores etc.

Why Amazon is not worried

For Amazon to drive its e-commerce revenues, more people need to purchase repeatedly on its platform. Also, it needs to be able to define the actual spending capabilities of people to tailor their online and offline experiences better, and grab a greater share of wallet.

Here are some observations on the shoppers at Whole Foods and its competitors:

  • A comparison of audience profiles of shoppers at Whole Foods, Walmart & Target shows Affluent heavily skewed towards Whole Foods. Discretionary monthly income comparisons also show that Whole Foods customers have at least $1000 to spend.
  • Whole Foods sees a larger percentage of young consumers (18–35) compared to Walmart and Target.

Now, income is seen to increase with age in the US, up to the age of 54 years:

So effectively, the acquisition gives Amazon access to Young and Affluent shoppers, who would grow richer in the coming years, which is a promising sign for future sales.

Does the true worth of the acquisition lie in Data?

The access to Whole Food’s data allows Amazon to build the following matrix, and define the possible strategic direction for each of the segments.

People who shop at Amazon

  • Of the existing Amazon customers, the ones already visiting Whole Foods need to be nurtured so that they spend more. The main strategy for them would be to increase share of wallet by upgrading them to services such as Prime, giving exclusive preview access to products on Amazon, and other benefits.
  • The Amazon customers not visiting Whole Foods need to be attracted there. If Amazon intends to drive adoption of products such as Echo, having an offline presence will allow customers to experience the product, thereby accelerating purchases.

People who do not shop at Amazon

  • For people who are not yet shopping on Amazon, but who go to Whole Foods, capturing them in-store and spoiling them with the Amazon experience would be key to breaking barriers for the giant.
  • For the consumers outside the Amazon and Whole Foods universe, Amazon may need to look at data platforms that are able to unify the data in the physical and digital worlds, and poach these untouched consumers from competitors. This is independent of the Whole Foods acquisition, but the consumers can be now lured to a seamless online/offline purchase journey.

Looking at some of the recent actions by Amazon, the pieces already look to be in motion, step by step, building on what Amazon is really trying to do - “Getting the affluent to spend more with them, and catching them young”.

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Also published in Medium.