Whole Foods to become a Prime perk for Amazon’s customers

Discussion
Photo: RetailWire
May 02, 2018
George Anderson

Those grumbling about having to pay $20 a year more to maintain their Amazon Prime subscription will soon have some additional perks to make it more worthwhile. According to a CNBC report, Amazon.com will offer 10 percent discounts on all products — every day and sale priced — purchased by Prime members shopping in Whole Foods’ stores and on its site.

The new perk has a three-fold purpose:

  • Attract more people to become and stay Amazon Prime members;
  • Entice more Prime members to shop at Whole Foods;
  • End the organic grocery’s “Whole Paycheck” image.

Amazon CFO Brian Olsavsky told analysts on last week’s earnings call that the Prime program continues to represent the best value in retail, with more perks continually being added.

A source told CNBC that fewer than 20 percent of Prime members are customers at Whole Foods, while 75 percent of the grocery chain’s customers have a subscription in Amazon’s program.

Other benefits for Prime members who shop at Whole Foods include access to exclusive deals, five percent cash back on purchases when they use the Amazon Visa card and free two-hour shipping from a growing number of the chain’s stores through Prime Now.

Whole Foods announced last month that it was ending its loyalty program effective today. At the time, the grocer sent an email to customers without specifics, but promised: “we’re cooking up something great with Amazon and we can’t wait to tell you about it.”

DISCUSSION QUESTIONS: What will be the impact of Amazon adding Whole Foods to its list of perks to the Prime program? How will it affect Amazon, Whole Foods and competitive retailers?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"If Whole Foods prices stay the same I don’t think a 10 percent discount is enough to drive new shoppers to the store."
"Amazon continues to amp up the pressure on competing online and brick-and-mortar retailers, forcing them to compete on several fronts..."
"Since 75% of WF shoppers are already Prime Members, the opportunity is for those Prime Members who don’t already shop WF."

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25 Comments on "Whole Foods to become a Prime perk for Amazon’s customers"


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Shep Hyken
BrainTrust

If you pay to be a member of the club, you’ll probably want to use the club. This is a brilliant move for Amazon to move more business to their Whole Foods acquisition and to deliver another perk to their Prime membership that makes the $20 increase seem insignificant.

Paula Rosenblum
BrainTrust

Isn’t this what they call a paid loyalty program for Whole Foods shoppers?

Honestly, given the movies, music and other perks provided, I ddn’t object to the Prime price increase at this point. The Whole Foods discount is just a plus. Do I think that I’ll get the $20 back over the course of the year by shopping at Whole Foods? I do. Do I think it will drive new shoppers into Whole Foods? I don’t.

As far as I know, most other grocers have loyalty programs already. They’re just free. And most interestingly, Publix, which has had no loyalty program until now, remains an American favorite.

I’d trade the 10 percent discount for a return to more local products, but that’s my ethos.

Art Suriano
BrainTrust

Amazon has and is continuing to change the Whole Foods brand. Adding them to Prime Pay and offering discounts will take those changes one step further. Whole Foods was never about savings or discounts; they were a brand built on quality and healthier food choices. Amazon’s mindset has always been about being the lowest price, so there is a massive disconnect between both philosophies. However, Amazon now owns Whole Foods so watch as it continues to become the discount store. I have said it before, and I’ll repeat it; expect the Whole Foods name to eventually become Amazon Foods and wait to see Amazon purchase another supermarket chain or two and merge them all. It’s how Amazon operates and its way of taking over.

Anne Howe
Guest

I agree that the Prime subscription for Amazon represents one of the best values in retail today. Adding a discount to Whole Foods every day and sale purchases is the expected benefit from the merger, and I’m glad they’re finally getting it in place.

Max Goldberg
Guest

Offering a 10 percent discount at Whole Foods may lure Amazon Prime members into the stores, but even with an additional 5 percent off for Prime card holders, the store is still expensive. That said, I think it’s just a matter of time until Amazon perfects the Whole Foods shopping experience. Competitive retailers should be nervous.

Jon Polin
BrainTrust

I’m curious if this program converts Prime members who are not current Whole Foods shoppers to become Whole Foods shoppers, but I am confident that it will result in generous, and likely unnecessary from a marketing standpoint, discounts to the 75 percent of the Whole Foods customers who are Prime members. But it’s Amazon, so who cares about inefficient marketing spend?

Dr. Stephen Needel
BrainTrust

I agree with Paula – it’s a nice perk for me as a Prime member and occasional shopper at Whole Foods. It sounds like rewarding 75 percent of your shoppers but it’s unlikely to bring in a lot of new business.

Jasmine Glasheen
BrainTrust

Not a bad perk, but will 10 percent off snatch consumer spend from Aldi and Walmart? Not likely. .. unless Whole Foods also pushes the value of its budget-friendly private label brand, 365 Everyday Value, along with the Prime member blitz.

Now where I see an opportunity is in converting health-conscious food shoppers who spend with local grocers. Hyper-local health food grocers are often more expensive than Whole Foods, but to attract these customers Amazon/Whole Foods would have to double-down on its local partnerships, presence at local events and philanthropy.

Ron Margulis
BrainTrust

I’m very surprised that a major retailer hasn’t teamed up with another e-commerce platform like eBay to offer services similar to the Amazon-Whole Foods combo. Costco members get a small discount for eBay purchases and vice versa. Also on a smaller scale with ancillary categories like Overstock or Wayfair with a food retailer. This cross-marketing strategy will help both groups reach more customers and has the potential stir up some good shopper engagement.

Dick Seesel
BrainTrust

Most of last week’s comments on the Prime price increase expressed confidence that Amazon will add more value to the program. Here’s a significant example that offers an incentive not only to join the program (if you’re a Whole Foods customer) but also to do more of your grocery shopping at Whole Foods (if you were a loyal customer elsewhere). A win all around.

Lyle Bunn (Ph.D. Hon)
Guest

Amazon’s addition of Whole Foods to the Prime program benefits was always in the cards and amounts to tinkering with branding and fussing with programs. The benefits come from scale and the continuous engagement of the shopper with communications about how changes are good for them. Amazon and Whole Foods share one common characteristic, the pursuit of brand equity by meeting consumer desires. The Prime program is a useful communications vehicle to advance this brand positioning.

Richard J. George, Ph.D.
BrainTrust

The measure of the strength of a loyalty or continuity of purchase program is the difficulty or stress caused by leaving the program. Think of the airline miles or hotel points lost or missed because you flew on a different carrier or stayed in a different hotel chain. For all the reasons noted in this article this is a sound strategic move. However, the added benefits for Prime members will dampen the exodus that may be caused by raising the annual fee for Prime.

Amazon continues to amp up the pressure on competing online and brick-and-mortar retailers, forcing them to compete on several fronts that do not represent strengths for these competitors.

Meaghan Brophy
BrainTrust
Meaghan Brophy
Senior Retail Writer
1 year 8 months ago

10 percent off is a great perk for Prime members who are already inclined to shop at Whole Foods. But if Whole Foods prices stay the same I don’t think a 10 percent discount is enough to drive new shoppers to the store.

Neil Saunders
BrainTrust

This is a great way of both enhancing the already highly-beneficial Prime program and of trying to drive trade to Whole Foods.

However, it is also a tacit admission that prices at Whole Foods are still way too high. True, Amazon has brought them down — but on many comparable items, Whole Foods is ridiculously out-of-step with Target, Walmart and, yes, Amazon itself.

On many basics, the 10 percent will likely help bring prices in line, but on some even with the discount Whole Foods will remain stupidly expensive.

Joy Chen
BrainTrust

Providing more consumer benefits would encourage more usage of Amazon Prime. It will also increase the trial of Whole Foods with Amazon Prime consumers which is an incremental benefit to Amazon. Great move by Amazon as it will increase the value of each Amazon Prime consumer to help offset the cost of providing this service.

Tony Orlando
BrainTrust

This will draw a few more high-end shoppers into Whole Foods for sure, and Amazon wins again. For most folks on a budget, they are not going to pay 30 percent to 40 percent more at Whole Foods just to get 10 percent off so, yes, Whole Foods will pick up business for sure, but many others simply can not afford to do their big weekly shopping there.

Kevin Simonson
Guest

Thanks George, great review.

IMHO, the biggest positive effect for Amazon/Whole Foods will be Customer Lifetime Value.

We work with e-commerce clients every day, and have found that a key factor affecting the long-term impact of advertising is CLV. It’s not as directly related to revenue as other metrics, but it’s certainly worth being aware of and measuring.

It all goes back to the question: What is the probability of your customers making repeat purchases?

Thanks to this new initiative, it’s higher!

Joan Treistman
BrainTrust

For the 75 percent of Whole Foods customers who are Prime members the new perk is a special treat. For Prime members who don’t shop at Whole Foods there’s a question as to how motivated they’ll be to go there and yet, they may just try it on for size.

My shopping at Whole Foods is selective. I try to avoid the over-the-top costs where I don’t see a particular value in terms of product type or quality. It’s my approach to budgeting and self-gratification. If grocery shoppers are going to more than one store regularly, Whole Foods may become part of their repertoire and their purchases could be enough for Amazon to underwrite their next perk.

Sterling Hawkins
BrainTrust

It was inevitable. I would be in agreement with Brian that the program represents the best value in retail prior to the announcement and this takes it to another level.

Ken Morris
BrainTrust
Ken Morris
Retail industry thought leader
1 year 8 months ago
Since only 20% of Amazon Prime members are Whole Foods shoppers, it may be a perk that inspires these consumers to try Whole Foods. The 10% discount on all purchases seems significant enough to help offset the perception of high prices at Whole Foods and if consumers can double dip on discounts by getting another 5% off if they pay with an Amazon Rewards Visa card, that is even more enticing. While many mid-priced and discount grocers haven’t focused on Whole Foods as a legitimate competitor, they may need to start considering them as a worthy competitor. It will be interesting to see if the added discounts are enough to get consumers to become frequent shoppers at Whole Foods or if they feel the discount isn’t enough to make the prices on par with their current primary grocery store. The real opportunity here is to get people to eat healthy for a better price point. Whole Foods locations are in a limited set of zip codes so I’m even surprised there is a 20% overlap.… Read more »
Craig Sundstrom
Guest

People shop or don’t shop at specific stores for a variety of reasons: price selection, location, a cute checker that winked at them…. Notice that price is only one of the reasons, and while that will be a deciding factor for a few, I’m guessing that it will be only a few.

As for giving people “benefits” that they might not want to make up for a price increase they don’t want, is going to be an idea with mixed results.

Ricardo Belmar
BrainTrust
This is what we all were waiting to hear since Amazon acquired Whole Foods. So it’s not unexpected, and in some ways just confirms that Whole Foods prices remain too high. It’s another great perk for existing Prime members, however. Will it get more Prime members to shop at Whole Foods? Maybe. I personally feel grocery shopping is very much about convenience and location, so if you’re a Prime member AND you live near a Whole Foods that you don’t normally shop at, you might give it a try with this perk. It’s also great for the 75% of Whole Foods customers who are also Prime members. But, for everyone else, I don’t think this will change their behavior. Does it justify the extra $20 for Prime for those that shop at Whole Foods? Yes. A better question now would be, should competitors be worried? Absolutely. Amazon is continuing to transform Whole Foods into a brick and mortar version of itself and over time we’ll see more of this. Ultimately, these locations will be Amazon… Read more »
Mike Osorio
BrainTrust

The increased cost for Amazon Prime membership is still a great value and part of that value are the additional perks such as this discount at Whole Foods. My family already shops Whole Foods for particular categories of products and we’ll continue to do so, and not likely at a higher rate than we do already. 10% isn’t enough to move the needle on our frequency or basket size.

Since 75% of WF shoppers are already Prime Members, the opportunity is for those Prime Members who don’t already shop WF. This will likely provide an incentive for some material percentage of non shoppers to try WF.

Steve Montgomery
BrainTrust

People won’t join Prime to save 20% at Whole Foods, but Prime members who also shop there will take advantage of the discount. This will not drive a growth in Prime membership or the number Whole Foods shoppers.

Kenneth Leung
BrainTrust

It is all about creating for the Prime program and ecosystem to keep the customers “sticky.” Is it going to drive some Prime members to go to Whole Foods? Probably a little bit. For Prime members who are already Whole Foods shoppers, that’s icing on the cake.

wpDiscuz
Braintrust
"If Whole Foods prices stay the same I don’t think a 10 percent discount is enough to drive new shoppers to the store."
"Amazon continues to amp up the pressure on competing online and brick-and-mortar retailers, forcing them to compete on several fronts..."
"Since 75% of WF shoppers are already Prime Members, the opportunity is for those Prime Members who don’t already shop WF."

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