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Amazon Whole Foods

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Amazon started in 1994, as an online retailer for books. Founder Jeff Bezos believed that e-commerce was the future of retail and the low price per piece and many number of titles made books an attractive starting point (Textbook, 319). Today Amazon has grown into one of the world’s largest companies with revenues in excess of $30 billion per quarter, as customers are able to purchase almost anything they like, delivered to their doorstep with the click of a button (Textbook, 321). Although the case study only mentions Amazon Go, Amazon has recently acquired Whole Foods to further immerse themselves in the grocery industry. Since the inception of Amazon.com, the online retail giant has diversified into multiple different sectors. …show more content…
Regardless of whether it will be a long-term success or not, Amazon has been trying to crack into the grocery sector for years with the inception of Amazon Fresh in Amazon’s early days. Amazon Fresh has not performed as well as expectations, likely because customers were worried about the quality of the food, especially perishable items that were being delivered to their house by a company that does not even have a physical store. For this reason, the Whole Foods acquisition and Amazon Go store provide a more strategic response to Amazon wanting to become a major player in the grocery sector and further disrupting the major stores such as Walmart and Target. Amazon will produce a natural synergy with Amazon Go as customers are charged directly to their Prime account after removing an item from the shelf, this will hopefully push more customers to purchase a Prime account so that they can take advantage of the Amazon Go store. The bigger challenge, from a synergy perspective will be how well Amazon can incorporate Whole Foods into the Amazon ecosystem. Whole Foods has traditionally pursued a differentiation strategy where they charge customers more for their premium, organic food and stores are usually located in more affluent neighborhoods across the country. The acquisition could provide synergy in terms of …show more content…
There is a high level of competition with the big stores like Walmart and Kroger; the threat of substitutes is high as there are low switching costs and plenty of options for other customers; the threat of buyer power is also high due to the reason of low switching costs and the information available for customers looking for other places to shop; supplier power is likely the weakest as large brands have multiple suppliers that all want to be on the shelves of the biggest stores; and finally the threat of new entrants is also relatively high as even small local stores are competition although starting a new grocery chain would be highly capital intensive. Amazon can manage this diversification by using what they have had success in and bringing it into Amazon Go and Whole Foods. First and foremost, Amazon is a delivery service so if they are able to incorporate their expertise in delivery to Whole Foods they could have success as customers move further toward online grocery shopping from a brand they trust. Amazon is also becoming more and more vertically integrated, with its range of private brands, so creating its own line of products within Amazon Go and even Whole Foods is the next logical step. The markup on these private label products is higher than regular items and in stores such as Kohls provide up to 50% of total

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