Yesterday, I got an email from Amazon, letting me know that my Prime card* would now get me 5% back at Whole Foods.
What strikes me as interesting about the marriage of Amazon and Whole Foods is how Amazon is using Whole Foods as a unique beachhead in its rapid assault on other retail incumbents. Before diving into those synergies, let’s look at points of difference between Whole Foods and other Amazon properties.
Consider two other online retailers Amazon owns: Zappos and 6pm.com (which Zappos bought in 2007; Zappos itself was bought by Amazon in 2009), as well as other ancillary Amazon brands like Audible and Goodreads.
ln most cases, Amazon effectively runs these businesses at an arm’s length. In fact, Zappos, 6pm, and Amazon itself carry many of the same products, but at different price points, in different sizes, and in different colors.
Take, for example, a pair of Nike Zoom Wildhorse 4s (excellent trail running sneakers that I just picked up). On Zappos, these sneakers ring in at $82.50 (depending on the exact color). On 6pm.com, they’re $65.99. And Amazon itself is a random, disorganized mishmash, with the same kind of sneakers clearly being listed under about a dozen different SKUs, for a wide variety of prices, many of them higher than MSRP.
There are other strategic distancing measures that Amazon has taken with Zappos and 6pm:
(a) There is no co-branding.
(Whereas, for example, Audible is proudly branded as “Audible: An Amazon Company.” I would argue that this is a logical brand extension, since Amazon is [still] fairly synonymous with books. But it raises the question of why Amazon would seek to minimize the appearance of its involvement with Goodreads, though I don’t doubt that Goodreads data shapes Amazon book and Kindle initiatives).
(b) There are no Prime benefits (points back, etc) when shopping on Zappos or 6pm.
(c) There are no in-house Amazon apparel brands on either Zappos or 6pm (so far as I can tell).
(d) There is (obviously) no cross-listing of products, and no importing of reviews from one site to another.
In fact, the only immediate “tell” that Amazon owns both Zappos and 6pm is that, at the very bottom of the homepage, one can see that Zappos or 6pm.com gift cards are provided by ACI, which is Amazon’s gift card arm.
At checkout, one can login using your Amazon membership (much as one can use Amazon Pay for Jeff Bezos’s Washington Post), but that’s about it.
Unless I were to specifically look on, say, Zappos’s About page, I’d be hard-pressed to find evidence of any real relationship between Zappos and Amazon.
I should be clear: this form of salutary neglect is likely deliberate. Zappos has a heralded, “flat hierarchy” corporate culture, whereas Amazon is distinct and hard-charging in its own way. The lack of product and marketing synergy is likely attributable to Amazon’s desire to keep these corporate cultures distinct, although I do wonder whether supply chain and fulfillment initiatives overlap. I think that they likely do.
Amazon ❤️ Whole Foods
But if Zappos/6pm is Amazon’s mistress, Whole Foods is its main squeeze.
Indeed, Whole Foods actualizes nearly every possible synergy point for Amazon and Whole Foods.
✅ Cross-selling of product (Alexa in Whole Foods, and Whole Foods on both Amazon Pantry)
✅ Use of Whole Foods products to support new initiatives (carrying Whole Foods private label brands in Amazon Go)
✅ Prime Benefits in store
Why the Credit Card Points?
The implementation of Prime benefits at Whole Foods has two obvious benefits:
(a) It incentivizes people who shop at Whole Foods, but don’t currently have Amazon Prime, to sign up for the service. However, I think that there is already a substantial amount of overlap here. I’d go so far as to wager that something like 70%+ of Whole Foods regulars are Amazon Prime customers.
(b) More importantly, it incentivizes Amazon Prime customers who are not regular patrons of Whole Foods to start doing their shopping there. You may remember that Amazon/Whole Foods is a small percentage of the overall grocery market — something like 2% or less. If, however, Amazon can use the popularity of Prime to push existing customers into Whole Foods, the needle starts to swing upward, and it can start experimenting at scale.
Where does Amazon Go from Here?
Now that it’s obvious that Amazon is so willing to use the power of Prime to encourage shoppers to visit Whole Foods, I think we’ll see a few points of exploration, particularly around things that may be Prime Member specific.
There is, obviously, the prospect of package pickup, and the use of Whole Foods for warehousing and rapid delivery. I think that Whole Foods may also serve as a template for things like curbside pickup, drone delivery (Many of the hurdles facing drone delivery have to do with the varying sizes of buildings and backyards — issues that standard-size Whole Foods do not have), as well as interesting ideas around payment tech at the register (the Amazon Reload cash-for-Amazon-points program, for example). Whole Foods may also serve as a way of testing the technology in Amazon Go at scale.
But, consider that, as of now, only Prime members truly accrue real points from using their Amazon card at Whole Foods, and that only Prime members can purchase Whole Foods items on Amazon iteself. More than anything, I think that we may see a tighter relationship between Prime (rather than plain old Amazon) and Whole Foods as time goes on.
I’ll close with a question for which I don’t have an answer. Amazon currently has three distinct physical presences: Amazon Go, Amazon Books, and Whole Foods. There are some obvious points of overlap, but there are even more points of synergy: I wonder whether Amazon will seek to actualize those potential synergies, or if — as it did with Zappos and 6pm and Goodreads and others — it will maintain substantial, and perhaps competing, points of difference between its distinct brands.
*(For those who don’t know: the Amazon Prime credit card is free with a Prime Membership. You get 5% back on all Amazon purchases. It’s a good choice if you spend more than $2,000/year on Amazon. It’s also made out of some kind of metal, giving it a nice sort of heft).