Amazon is reaping the benefits of its increasingly finetuned supermarket strategy, as Whole Foods and Amazon Fresh are developing as complementary concepts.
Increased footfall
For some time, it had looked as if Amazon’s foray into the world of physical supermarkets would not pay off: footfall remained low at Amazon Fresh, the supermarket concept that Amazon has been rolling out since 2020. Meanwhile, and Whole Foods was one of the only supermarket chains not to benefit from the Covid pandemic. Analysts were beginning to wonder if Jeff Bezos was really unable to crack the code of food retail after all?
However, things appear to have changed direction: at the oldest eight Amazon Fresh stores in the United States (out of 23), the number of visitors increased throughout 2021. The debut store in California (operating since August 2020) even saw 24 % more visitors between the second and fourth quarter of last year. The novelty had worn off by then, so the figures mainly show how the supermarkets are becoming more and more embedded in the community, an analysis by American company Placer.ai (which specialises in footfall counts) concludes.
Whole Foods recovers
“So far the data looks promising“, Placer.ai’ Shira Petrack told Supermarket News. While there may be some Covid effect – people going out less or limitations on the number of customers – the fact that shop floor occupancy increased across the board indicates, according to Petrack, that these locations are generating greater demand over time. “A positive sign for any retailer”, she says. People were also visiting stores closer to home, which in turn indicates that the supermarkets are becoming less of a novelty and are managing to attract more local customers.
Whole Foods also seems to be emerging from its drop. Unlike most food retailers, the retailer did not experience a rise in sales during the Covid pandemic. On the contrary: in early 2021, the number of visitors at the premium chain, which specialises in organic food, plummeted. This has since changed: whereas the stores had 20 % fewer visitors in January compared to 2019, this was down by only 5.2 % by December 2021. In the meantime, forty new store openings have even been announced.
Complementary formulas
Whole Foods and Amazon Fresh appear to be complementary. From cross-shopping data, Petrack concludes that Amazon Fresh customers shop more at discounters like Ralphs and Aldi, but not so much at Whole Foods. In fact, internal cannibalisation is declining: in July 2021, 13 % of Amazon Fresh customers also went to Whole Foods, but by December, this was down to 10.3 %. Amazon Fresh is increasingly positioning itself as a price fighter, while Whole Foods as a premium supermarket chain appeals to a very different consumer base.
Petrack therefore expects Amazon to strengthen its position in the supermarket sector this year. For example, the omnichannel giant recently announced that it would open larger, till-less Amazon Go supermarkets on the outskirts of cities. In line with this, the company will equip Whole Foods stores with the same Amazon Go’s till-less Just Walk Out technology.
