Part 2 in the series on supermarket disruptors
Amazon Prime is an annual membership program that includes free shipping including same-day delivery on select products, access to instant streaming of thousands of movies and TV episodes, unlimited music, Alexa voice shopping and access to thousands of Kindle books and content.
A few weeks ago I referenced a Market Shift Study by IRI which stated that consumers in general, especially Amazon Prime members, are satisfied with their grocery shopping experience and are more likely to shop at Whole Foods. With more than 100 million Prime subscribers around the world (up from 63 million in 2016), Amazon shipped more than 5 billion items through Prime in 2017.
According to Forbes, revenue for online subscriptions to Prime services increased 49% year over year, handily outpacing the 20% year-over-year revenue growth from its online store segment.
This explosive membership growth puts Amazon in a prime position to expand grocery sales. And that push continued this past Wednesday, when the online retailer announced that Amazon Prime members would get an additional 10% off sale items when they shop at Whole Foods. The discount will apply to hundreds of products throughout stores and to receive, shoppers simply sign into Prime on their Whole Foods app and scan the app at checkout.
By the Numbers
70% of Americans with incomes of $150,000 or more who shop online have Amazon Prime memberships. This provides a great opportunity to drive Prime traffic to Whole Foods and the perks give extra incentives to link the Prime Membership together with Whole Foods purchases. Earlier this year, Amazon gave Whole Foods shoppers who use the Amazon Prime Rewards Visa card 5% cash back on purchases. In addition, Alexa, Smart Home and Prime Now delivery services are designed to attract and retain Prime customers who have higher disposable incomes and are willing to pay for convenience.
According to Forbes, Amazon Prime has 3.4 times the number of customers Whole Foods Market has and is changing the pricing and profitability of food retailing now. As I stated in my previous post, Amazon has been systematically making price cuts at Whole Foods while increasing advertising to increase visibility with consumers especially Prime members.
What does this mean?
Amazon has a huge captive audience that is primed to dominate the grocery business. So, we can expect to see larger increases in grocery sales and delivery services in the next few years. Look for more updates as we continue to monitor these disruptor trends.
