Consumer Reports has no relationship with any advertisers on this website.
Amazon’s planned purchase of organic-food chain Whole Foods for $13.7 billion is one more sign that the born-and-raised online retailer wants to be the singular place Americans go to shop, even if that means walk-in stores.
For grocery shoppers, Amazon’s move is likely to bring more food choices and lower prices. The existing Whole Foods stores give Amazon a bigger distribution network for its delivery business, so they will be able to reach more customers.
“Amazon can be expected to work to deliver better value to grocery customers, both online and within the brick-and-mortar space,” says Mark Hamrick, a senior economic analyst with Bankrate.
The deal, which is expected to close in the second half of this year, would give Amazon access to 460 Whole Foods locations in the U.S., Canada, and Britain.
In key ways, Amazon already has tried to disrupt the supermarket industry by experimenting with home grocery delivery and by setting up pickup spots for online orders.
Amazon has played in the grocery space for years, but this latest move signals that the online giant is more focused on the industry and looking to dramatically disrupt how Americans buy food.
Making Food Shopping More Convenient
Consumers love the idea of skipping the checkout line and ordering food from their laptop or mobile device—to be delivered at a time that’s convenient for them.
AmazonFresh’s website is easy to use and information-rich—with a click you can access even more nutritional information about the various foods for sale than you’re likely to easily find in a supermarket.
In Seattle, Amazon is experimenting with two locations with kiosks where shoppers can pickup online grocery orders.
Walk-in supermarkets are responding to Amazon by upping their delivery game. Kroger and Walmart having begun testing door-to-door delivery in certain locations, and regional supermarket giant Publix is testing home delivery in certain areas of the Southeast.
Traditional chain supermarkets are also trying out other services that make grocery shopping less of a time-eating chore. Walmart offers a “click and collect” system called Online Grocery Pickup in more than 30 states: Consumers buy online and drive to a Walmart store to pick up their bagged orders at designated times for no fee. Kroger’s ClickList service, available at 300 stores, works the same way.
Driving Prices Down
AmazonFresh’s real boon to consumers is its food delivery, but its low prices are another draw.
“AmazonFresh is a low-cost leader when it comes to shelf-stable packaged foods,” says Burt Flickinger III, managing director at Strategic Resource Group, a consumer industry consulting firm based in New York City.
These cheaper foods include condiments such as ketchup and mustard, canned foods, pasta, cereals, and health bars. Flickinger says Amazon’s prices on these foods are 12 to 20 percent lower than those at Jet.com, an e-commerce site owned by Walmart.
One way Amazon keeps prices low is by unbundling large packs of food, like the kind you see at warehouse clubs such as Costco, and selling the components individually, says Sam Gagliardi, head of e-commerce at IRI Worldwide, a market research firm in Chicago. In this way Amazon is able to pass the savings on to its customers. Amazon also sells baby food at cost to entice busy parents to become loyal customers, according to IRI.
Access to good value, ironically, comes at a cost. To shop at AmazonFresh, you have to be a Prime member, which costs $99 per year. You also have to pay an AmazonFresh a $15 monthly fee that covers unlimited orders of $40 or more. If your order comes to less than $40, there is a $10 delivery fee.
Bringing the Future to the Food-Shopping Experience
Amazon's approach could eventually influence the operation of walk-in stores.
Last year the retail giant announced the opening of a new grocery store prototype in Seattle with no checkout lanes. Instead of paying at a cashier (self-checkout or otherwise) customers will simply grab what they want and leave, without ever engaging with an employee. This would work through a smartphone app and sensors placed throughout the store. Payment would be automatic through an app link to a customer’s mobile-payment service. The opening of this store, originally scheduled for March, has been postponed for technical reasons.
But customers who want a futuristic shopping experience right now can try Alexa, the digital assistant that lives in Amazon’s Echo smart speaker and other devices.
If you realize you’re out of milk, you can ask Alexa to add it to your AmazonFresh order or any other grocery list. If there’s any uncertainty as to what you exactly want, Alexa will list a handful of related products with prices that you can pick from. And Amazon is using other devices to make reordering the stuff you use easier, too. The newest version of its Dash Wand includes Alexa capabilities, which the company hopes will encourage more Prime members to order more kinds of items more often.
Copyright © 2006-2017 Consumer Reports, Inc.