Amazon started its first week as the new owner of Whole Foods Market by cutting prices on select items and cross promoting the tech gear it sells on its website, but the biggest challenge lies ahead: Luring new customers.
Sure, the online giant can leverage the power of its Amazon Prime membership to promote the upscale supermarket chain. But that likely won't be enough as seeks to keep Whole Foods' devoted following while expanding it.
"Amazon will stay reverent of the DNA of Whole Foods, so the core doesn't abandon it and begin to educate those that are likely to experience the brand (for the first time) about the wonderful elements that are priced in a delicious way," said Eric Schiffer, CEO of the California private equity firm the Patriarch Group.
The venerable Austin-headquartered chain known for natural foods and high prices needs a jolt, experts say, if it's going to deal with seven straight quarters of sales declines at stores open at least a year.It will need to pull customers from other chains in the $750 billion grocery industry, reaching beyond its relatively narrow demographic of affluent shoppers who see organic foods as healthier than normal supermarket fare and who embrace causes like animal welfare.
According to experts, the new customers could include:
Given Amazon's expertise in delivering goods, people who don't live near a Whole Foods store will be able to order online and have it delivered. Whole Foods has only about 460 stores in the U.S., Canada, and the United Kingdom, a smidge compared to the number of supermarkets overall, so reach becomes important.
"The convenience of Amazon is why you'd do it. It's like your favorite store just opened one closer to you," said Bob Phibbs, CEO of the New York-based consultancy The Retail Doctor. "They're going to be curious."
Amazon Prime members
Whole Foods products are now listed on Amazon, so those already gung-ho enough about Amazon to pay the monthly or annual fee will want to sample these new food options.
For Amazon Prime members who aren't physically close to a Whole Foods store, the transition will be even easier and the insider benefits, more enticing.
More than half of online grocery shoppers are Amazon Prime members, according to the NPD Group, a research outfit.
Penny pinchers have long steered clear of Whole Foods, given its reputation for prices so out of whack with mainstream markets that was known as "Whole Paycheck." That could change.
"Cost is the most important," said Deborah Finney, 53, a property manager from Hackensack, N.J., as she walked into a store. "You want the most bang for your buck."
If costs can be reduced, you'll have (people from) different walks of life coming here to shop," she added.
People who might've bought at Walmart or someplace like that will find it's cost-conscious to shop there," explained Larry Chiagouris, a marketing professor at Pace University a consumer behavior expert.
Millennials, early in the careers with many of them watching their spending, could become Whole Foods devotees. But it's all about price.
They are shoppers like Benjamin Kaneda, 20, a student from Montclair, N.J., who stopped at a Whole Foods in midtown Manhattan and left carrying only a cut-up melon and bag of carrots.
"It's too expensive," he said. "I saw the price drop and wanted to check it out."Whole Foods needs to find more Millennials who are attracted not only by lower prices, but the technology that Amazon brings to the market experience. That, combined with a consciousness about nutrition and aversion to genetically modified foods, pesticides and anything else they don't deem as natural, could make them regulars.
"This is the ultimate dream marrying those principles with technology, which runs through their veins," Schiffer pointed out.
Fair-weather Whole Foods shoppers
Some consumers already treat Whole Foods as more of a specialty store than a supermarket, buying only select items there. Thanks to lower prices and better access, they may increase their purchases -- even if it still doesn't become their primary market.
Others will just continue to stay away.
Even with select lower prices, "what someone would pay $70 to $80 at BJ's Wholesale Club, Winn-Dixie or ShopRite, they're paying $100 for" at Whole Foods, said Burt Flickinger III, managing director of the Strategic Resource Group, a retail and consumer goods consultancy.