Whole Foods, Amazon and the “Last Mile” in Grocery Delivery

It will be a long time before the dust settles from the announcement this morning that Amazon will buy Whole Foods.

The deal, valued at $13.7 billion according to CNBC, has the potential to change everything about the way Americans shop for groceries. Shares in rival supermarket chains fell hard on the news, as Wall Street tries to digest the idea of e-commerce giant Amazon finally winning a sizable share of grocery.

At times like this, we turn to the data for insights. And the data never disappoints.

Here are a few noteworthy data points that illuminate the potential of the Amazon-Whole Foods tie up.

  • Amazon is already the biggest e-commerce player in America. And it has become so pervasive in retail that 42 percent of consumers bought something from Amazon last year, according to the Checkout Penetration Index. But when we drill down a bit deeper, the Penetration Index shows that a full 60 percent of Millennials are Amazon buyers.
  • By contrast, just 20 percent of American consumers bought at least one item from Whole Foods last year. And that’s down 3 percentage points from the prior 12 months. But among Millennials, the number is substantially higher: 24 percent. That’s extraordinary penetration for a supermarket chain with just 431 stores.
  • The deal now gives Amazon control of those 431 stores, nearly all of which are in neighborhoods that are more affluent and younger than America as a whole. Those stores solve much of Amazon’s “last-mile” delivery challenge for fresh groceries -- which is arguably the biggest single reason that Amazon has not been able to make a dent in the grocery shopping of the 60 percent of Millennials who already buy other items from Amazon.
  • And of the people who already buy groceries through the Web -- 52% of them are Amazon Prime members, according to research from The NPD Group. Those 431 stores suddenly make it easier for those Prime members, who tend to purchase heavily through Amazon, to get access to fresh produce/foods.

“Fresh foods are the final frontier for Amazon,” said David Portalatin, industry analyst for food consumption for NPD, “and figuring out how to get it to your front door is the ultimate in convenience for consumers. In order for amazon to get the volume growth they are looking for, fresh foods has to be part of the equation. This deal gives them credibility with consumers and a major foothold in that space.”

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