October 27, 2017
The headline-grabbing Amazon-Whole Foods Market deal appeared as a mere 2.9 percent of net sales when the online giant reported its third-quarter earnings Oct. 26.
Amazon’s net sales increased 34 percent to $43.7 billion in the third quarter, compared with $32.7 billion in third quarter 2016. Net sales includes $1.3 billion from Whole Foods Market, which Amazon acquired on Aug. 28.
Since that deal closed, speculation has swirled around the industry as to why Amazon bought the supernatural retailer and how the retail chain will change.
Here’s what we know now from Chief Financial Officer Brian Olsavsky, who fielded questions during Amazon’s third-quarter earnings call.
1. Customer obsession is key
Ownership is still in its early days, but Olsavsky highlighted Amazon’s quick moves to reduce price on key grocery items, launch Whole Foods Market private label products on amazon.com and add Amazon lockers at some Whole Foods locations.
The leadership teams are like-minded and customer obsessed, he said, which has Whole Foods ready to “expand its offerings.”
2. Integration will continue
More integration and “touchpoints” will be visible as Amazon explores ways to serve customers using Amazon Fresh, Amazon Pantry, Prime Now and Whole Foods Markets.
Some may expand and some may become combined.
“There’s no one paradigm for all customer engagement, and we’re looking for the ones that resonate best with customers and we’re going to continue with those,” Olsavsky said.
3. Whole Foods will expand
The CFO confirmed that Whole Foods expansion will occur, but management is not ready to announce what that will look like.
4. Watch for new store formats
“We’re experimenting with a lot of formats,” Olsavsky said. “I think Whole Foods really gives us a vast head start on that and a great base and a great team to work with who has a lot of history. They probably have 10 to 20 years of learnings that we don’t have and wouldn’t have.”
5. Amazon Prime rewards loyalty
Amazon Prime will become a platform for a Whole Foods Market customer loyalty program. A timeline was not announced.
What we don't know:
When asked about adding pharmacies at Whole Food outlets, the CFO answered simply: I cannot confirm nor deny rumors.
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