As Prime Day approaches, the focus turns to the most high-profile acquisition by Amazon (NASDAQ:AMZN): Whole Foods. This coming Prime Day (and one-half) is set for July 16 at 12 p.m. Pacific time through July 17.
This will mark the first Prime Day since the acquisition of the organic grocery chain. Hence, the question revolves around the effects on Whole Foods. Given the progress of integrating the grocery chain into Amazon and the discounts offered, I think Prime Day could serve as a true launch of the new Amazon-owned Whole Foods.
Consumers Have Seen Less Impact Than Expected
The Amazon-Whole Foods merger closed on August 28, 2017. The integration of the grocery chain into Amazon has come more slowly and more subtly than most expected. As many stock market observers will recall, shares of grocers such as Costco (NASDAQ:COST), Kroger (NYSE:KR), Target (NYSE:TGT) and Walmart (NYSE:WMT) fell significantly as news of the merger prompted an “Amazon will take over retail” narrative.
The actual results of the merger have so far underwhelmed investors. After the merger, some discounting at Whole Foods occurred. Few still call the grocer “Whole Paycheck.” However, customers have seen few of the larger discounts found on the amazon.com platform.
Moreover, Amazon Fresh, the grocery delivery service set to merge with Amazon’s other delivery service, Prime Now, has received mixed reviews. The reviews from Amazon’s website give Amazon Fresh 3.3 out of 5 stars.
Prime Day Could More Formally Relaunch the New Whole Foods
Amazon also recently began offering Prime Member Deals, deep discounts on select items at Whole Foods. As a user of this service, I found it easy to use and was happy with both the price and quality of the food. Because Prime Day falls during the discount period, Amazon has also offered more Prime Member Deals than usual over the next week.
Nobody can know how Prime Day will succeed beforehand. Still, I see this as the real launch of the new Amazon-Whole Foods. These discounts should interest shoppers, particularly those who have not shopped with the grocer recently. Customers who spend over $10 at Whole Foods between July 11 and July 17 receive a $10 credit. They can use this credit on Amazon orders during Prime Day. Grocery stores frequently offer deep discounts on individual items or through coupons. However, across-the-board cash discounts rarely come from grocers.
Also, Whole Foods customers who use the Amazon Prime Rewards Visa card will receive 10% cash back, up from the regular 5%, between July 14 and July 17. New users of the Amazon Prime Now delivery service will also receive $10 off their first order and an additional $10 off a future order.
Only Prime members can enjoy these discounts. Still, an estimated 40-60% of U.S. households have become Prime members already. Despite my past criticism of Amazon, I must admit the Whole Foods discounts offer a compelling incentive for those who have hesitated to sign up for Prime. It also provides a reason to stay with Prime for those who might otherwise balk at the recent price increase.
Concluding Thoughts on Prime Day at Whole Foods
Prime Day gives Amazon a second chance to relaunch the Amazon-owned Whole Foods Market. The takeover of the grocery chain by Amazon initially sparked fear across retail. However, once the merger occurred, the grocery delivery service received mixed reviews. Also, the lower pricing at Whole Foods did not make the grocer as price competitive as many had anticipated.
Now, Amazon gets a second chance with Prime Day. The $10 discount offers a reason to buy from Whole Foods and sign up new Prime members. They also get a chance to try Prime Now delivery with two separate $10 discounts. Moreover, many who see the Prime exclusive deals may shop at Whole Foods more or sign up for Prime if they currently do not subscribe.
I do not think a Prime Day success will bring back the “Amazon will take over retail” sentiment. However, Amazon can use this opportunity to reintroduce Whole Foods as an Amazon company more formally. If done successfully, such a relaunch could make Whole Foods more like the “Amazon Grocery” that many envisioned when Amazon announced the merger.
As of this writing, Will Healy did not hold a position in any of the aforementioned securities. You can follow Will on Twitter at @HealyWriting.
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