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Bloomberg reports that there is evidence that Amazon’s ownership of Whole Foods is having an impact on bringing in new customers and sales to the grocer.

According to the story, “In more than 100 places around the U.S., the upscale grocer gained foot traffic at the expense of Trader Joe’s, Walgreen and Dollar Tree Stores in the past year, according to Sense360, a Los Angeles company that tracks location data from millions of smartphone users.

“The data, which covers Whole Foods locations within one mile of competing stores, demonstrate that Amazon can lure loyal Prime members to physical stores with discounts.”

In addition, the story says, “The number of shoppers who visited a Whole Foods at least six times in the past year increased to 11 percent in August from 9 percent a year earlier, according to surveys by consumer products research firm Tabs Analytics. Amazon has been targeting its discounts and credit card reward at its millions of Prime subscribers, intensely loyal customers who pay annual or monthly fees for subsidized shipping and other perks.”

And, Bloomberg writes, “Initially industry watchers believed Amazon would force other grocers to lower prices and sacrifice profit margins; in fact, the opposite has happened, with food prices rising and profits growing, says William Kirk, an analyst at RBC Capital Markets. Whole Foods is a niche, urban chain with only about 470 stores and little overlap with Walmart’s 4,000-plus stores and Kroger’s almost 2,800 locations that are mostly located in suburban markets.

“Both companies have fully recovered from the initial Amazon scare, and strong food sales are fueling investor optimism in Walmart, the biggest U.S. grocer with 25 percent of the market compared with Amazon’s less than 2 percent. The threat from Amazon is far more pronounced for Trader Joe’s Co. and other regional urban supermarkets.”
KC's View:
I think it is critical for retailers to remember one important thing about the Amazon-Whole Foods construct - they are just at the beginning. Whatever they’ve done are just the initial baby steps as Amazon tries different approaches and promotions designed to test the limits of what works and doesn’t, and the limits of what customers respond to and don’t.

I do know this. I have a Whole Foods within walking distance of my house - I use it as a convenience store as much as anything - and I’ve completely gotten into the habit of using the Amazon-Whole Foods app to get discounts. And when I’ve asked checkout personnel how many customers are doing the same thing, they almost always respond that the vast majority are … this behavior has been quickly adopted, it seems.

The question that retailers need to ask themselves is not so much about what has happened already, but, “What’s next?”