We called it. Ok, everybody called it. When Amazon purchased Whole Foods some seven months ago, we, along with almost everyone else who was paying attention at the time, predicted this move – so it comes as very little surprise. (The rest of our prognostications can be found here.)
By Mike Giambattista
And the reasons why should be fairly obvious as well. Around 75% of Whole Foods shoppers are Amazon Prime members but less than 20% of Amazon Prime members are Whole Foods shoppers. Amazon disclosed recently that it roughly 100 million prime members. Do the thumbnail math and that’s a LOT of upside.
Strategically, the move makes lots of sense for the mothership as well, however. By adding grocery perks to its already robust Prime offerings, Amazon moves closer to building its very own, in-house coalition rewards program. I’m sure I’ll get flack for that last sentence but for a moment, lets not get hung up on nomenclature and instead, lets look at the strategy.
- Whole Foods shoppers tend to be upper tier in terms of income. This moves draws that valuable cohort deeper into the fold.
- Amazon now offers the most well-rounded portfolio of virtually any rewards program in existence – both in terms of earn and burn potential – thus fortifying its hold on the marketplace.
- Promotions and discounts are typical in the grocery industry. Whole Foods is, therefore, looking to strategically use them to target Amazon shoppers.
- For vendors, it is a fresh opportunity to reach a new customer base at a time when competition in the natural food industry is fierce. Most natural and organic brands have only broken through to a small set of households.
The original Whole Foods rewards program offered an initial 10% discount with incentives to grow that discount with more purchases. Under Amazon Prime, Whole Foods shoppers will receive an additional 10% off of already discounted products. Plus, Amazon has already begun to roll out other perks such as free delivery of Whole Foods products to Prime members in certain locations, 5 percent cash back when members use its Visa rewards card at Whole Foods stores and exclusive member deals.
Its interesting though, that Amazon chose to completely dismantle Whole Foods’ existing rewards program instead of opting for some sort of integrative process. A page on Whole Foods’ website, entitled “Change is Coming”, offers little to Whole Foods program members other than a series of announcements and deadlines. And while it is informative in its directness, it does nothing to entice those heretofore valuable customers over into the promised land.
But I suppose 900 lb. gorillas can get away with that sort of thing.
Mike Giambattista is Editor in Chief at The Wise Marketer and is a Certified Loyalty Marketing Professional (CLMP).