The Amazonification of Whole Foods Market appears to be boosting customer perception of the grocer -- albeit incrementally.
According to a new survey released by market research firm Morgan Stanley, Whole Foods customers indicated they have had a better overall experience at the grocer since Amazon took over last fall.
The research firm has studied various components of the grocery industry post-merger, including the customer makeup at Whole Foods, online shopping and obstacles that might be keeping the Austin-based company from gaining more ground.
Out of almost 3,000 adults that Morgan Stanley surveyed online in May, the top change observed at Whole Foods during the past six months was better quality of products, followed by lower prices.
Since completing its $13.7 billion deal for Whole Foods last August, Amazon has focused on prices by trying to draw more of its Amazon Prime customers into Whole Foods stores. Amazon recently started a discount program for Prime members at Whole Foods, and has also expanded its grocery delivery service throughout the country. Among its offerings, membership to Amazon Prime has included free grocery delivery and 10 percent off already discounted items at Whole Foods.
“Prime is what Amazon has built their business on,” said Phil Lempert, a grocery analyst with California-based Supermarket Guru. “They are all about building relationships with shoppers.”
The survey results show Whole Foods already has a high amount of Prime membership upon which to build on. Almost 70 percent of survey respondents who shop at Whole Foods said they were also Prime members. Walmart, in comparison, has the lowest percentage of customers who are also Prime members, at 48 percent, according to the survey.
While Amazon’s grocery efforts are commonly measured in terms of what Walmart is doing, in reality, Whole Foods has shared more similarities with other chains.
According to the survey, Whole Foods has the greatest shopping overlap with Trader Joe’s, Fresh Market and Sprouts shoppers, with 38 percent of Trader Joe’s shoppers, 37 percent of Fresh Market shoppers and 29 percent of Sprouts shoppers also shopping at Whole Foods.
That overlap, however, will likely diminish as Amazon and Whole Foods integrate more, according to Lempert, who said Whole Foods’ business tactics are beginning to mirror that of mainstream grocery chains.
Whole Foods, for example, recently backed away from its region-by-region buying strategy, making it more difficult for small, locally-based brands to make their way into stores.
“The regional chains, like the H-E-Bs of the world, that’s who I see Whole Foods competing with more,” Lempert said. “Whole Foods was always known for taking small, innovative companies and growing them. Not anymore.”
While the partnership between Amazon and Whole Foods is relatively young, survey results show the pair have a long way to go to be among the leaders in the grocery business. Out of total money spent at grocery stores by survey respondents in the past three months, Whole Foods had just 2 percent of the market share, compared to industry leader Walmart’s 23 percent market share.
Whole Foods’ generally higher prices continue to be play a role in its low market share.
The top barrier to shopping at Whole Foods cited by survey respondents remained - by a large margin - its prices.
But many in the industry expect Amazon to continue addressing that weak point through more Prime perks, Lempert said.
Amazon wants “to have a relationship with Whole Foods customers,” he said. “The relationship should continue to evolve with more benefits.”