When online retail giant Amazon.com announced last month that it planned to acquire Whole Foods Market for a whopping $13.7 billion, Wall Street gyrated, giant grocery chains trembled and the Internet went berserk.
In the days since the bombshell news dropped, Sacramento-area shoppers have offered up more sedate, wait-and-see reactions.
People who talked with The Sacramento Bee acknowledged that Amazon’s massive cash play was a big deal, but most said that their grocery shopping habits are unlikely to change.
“I’ll shop like I always have,” said Sacramentan Pat Chavez, a 38-year-old homemaker pushing a cart in front of Whole Foods at 4315 Arden Way in Sacramento. “I’m sure things will change … and with Amazon it probably means things will get better, but I won’t change what I do.”
At Whole Foods Market at 1001 Galleria Blvd., in Roseville, 52-year-old Roseville resident Vanessa Long agreed that “Amazon has so much money that they’ll probably spend a lot to make (Whole Foods) an even better place to shop.”
She added: “Some of our friends were talking about grocery delivery and how that might change … but I’m pretty set in my ways. I have to see and pick up things like meat and produce before I buy it. For me, that’s not going to change at all.”
At the Whole Foods store at 270 Palladio Parkway in Folsom, where local resident Ron Li and his wife were shopping for their family of four, Li also said he tended to be a “hands-on” grocery buyer, but the Lis said they were not opposed to having groceries delivered to their doorstep in Folsom.
“I think that’s the way it’s going to be anyway, because families are so busy now,” Li said. “If Amazon can make that work (more) efficiently, that’s great. I’m sure they know what they’re doing. You don’t spend that kind of money for nothing.”
Retail and grocery industry analysts generally agree with Sacramento-area shoppers: Initially, visitors to brick-and-mortar Whole Foods stores won’t notice much change. But beyond the well-stocked aisles and gleaming meat and produce counters, experts contend that major shifts are occurring in the grocery sector.
Analysts contend that part of Wall Street’s super-heated reaction to Amazon’s move to swallow Whole Foods is due to the newness of the move in the grocery industry. Amazon’s relentless growth as an online retail powerhouse has prompted hundreds of brick-and-mortar store closures by longtime, traditional retail heavyweights such as Sears, Kmart and Macy’s, but the grocery industry has not yet experienced those convulsions.
... let’s not forget that Amazon gets more than 400 (Whole Foods) brick-and-mortar locations in premium, high-income neighborhoods from which to sell its other wares.
Deb Gabor, a branding expert and CEO of Sol Marketing in Austin, Texas, where Whole Foods Market is headquartered
In an analysis released after Amazon’s move, Chicago-based commercial real estate services company Cushman & Wakefield noted: “The grocery world has stood out as one of few retail categories where e-commerce disruption has been minimal. Grocery has been seen as e-commerce-resistant, if e-commerce-proof. Total online grocery market share in the U.S. stood at just 1.4 percent as of the close of 2016, comprising $8 billion of $989 billion in food and drug retail sales. Groceries alone were in the 4 percent range.”
With Amazon’s move on Whole Foods, Cushman & Wakefield added: “Analysts and publications are already proclaiming that grocery will be the next shoe to drop at a time in which it seems bricks-and-mortar retail is being challenged on virtually all fronts.”
Trepp, a leading international analyst of commercial real estate and banking markets, agreed in its latest analysis of the grocery segment: “The grocery store narrative today feels a lot like the shopping mall story did two years ago.”
While Sacramento-area Whole Foods shoppers might not see immediate changes with Amazon in charge, analysts point to the latter’s massive storage and distribution infrastructure and how it might be applied to the grocery industry. They say Amazon’s track record in wide-ranging retail segments speaks for itself.
“Amazon’s acquisition of Whole Foods is in line with their strategy of being the go-to brand for on-demand everything; they've introduced things like video streaming and on-demand restaurant delivery,” said Deb Gabor, a branding expert and CEO of Sol Marketing in Austin, Texas, where Whole Foods Market is headquartered.
Gabor believes that “Amazon's extensive delivery capabilities give Whole Foods a new opportunity to differentiate and bond with customers they previously didn’t or couldn’t access. And let’s not forget that Amazon gets more than 400 (Whole Foods) brick-and-mortar locations in premium, high-income neighborhoods from which to sell its other wares.”
I have to see and pick up things like meat and produce before I buy it.
Whole Foods shopper Vanessa Long, on why Amazon’s purchse of the chain won’t likely change her grocery shopping habits
Grocery delivery services are already making inroads throughout Northern California.
In February, for example, Blue Apron, the New York-based fresh ingredients and meal delivery service, chose Fairfield as the site for its West Coast packaging and fulfillment hub, with the promise of more than 1,000 jobs at a 430,000-square-foot warehouse at Gateway 80 Business Park after an expected 2018 opening.
Just this year, two San Francisco companies began delivering groceries customized to the needs of Sacramento-area customers. Instacart launched its internet-based grocery-delivery service in March. In May, it teamed with personalized nutrition service provider PlateJoy to offer same-day delivery of groceries tailored to individual nutrition requests.
Amazon.com recently expanded its local home-delivery services. On June 1, its Prime Now fast-delivery service was launched for items sold by Sacramento-area Sprouts Farmers Market and Pet Food Express stores. With it, Seattle-based Amazon said Prime Now members had the option of shopping online or via an app and have store merchandise delivered to their doorsteps within two hours for free.
Experts say grocery-delivery services are still in the early growth period, but they contend that increasing numbers of comparatively younger consumers favor it.
“Amazon’s move represents just how much hands-off millennials are influencing the future of all service industries,” said Colin Walsh, CEO of San Francisco-based Varo Money, which oversees a digital banking app. “We’ve been doing consumer research for the past year and a half, and we’ve seen what hands-off millennials want: digital solutions that let them get things done and get on with their lives.
“We’ve talked directly to hundreds of millennials, and Amazon is consistently the No. 1 app that comes up as their favorite.”
At the Sacramento Whole Foods Market, 25-year-old city resident Ken Morgan said he and his friends like the idea of “get it now” from a wide range of retailers: “Anything that gives you the option of doing it right away online … or with an app is convenient.”