Amazon, Whole Foods Ignite Grocery Digital Transformation: Part 3

In purchasing Whole Foods Market, Amazon became a major player in the grocery store channel, and also forced established retailers to go more boldly into the digital space. HomeWorld’s Supermarket Report looks at Amazon’s Whole Foods initiatives, online trends in the grocery channel and how technology is playing a key role.

Today, part 3 looks at the influence of technology. Parts 1 and 2 look at the Amazon effect and the Whole Foods effect, respectively.

New Paths To Commerce

Not all Amazon initiatives involving food and consumables are tied into Whole Foods, however.

Amazon has been adding new elements to its Dash program. Dash Replenishment encourages Amazon vendors to develop smart products that automatically reorder consumables when supply runs low. Already, Pur and Brita offer products as part of the initiative. Dash Replenishment enables smart, connected devices to measure supply consumption then signals and automatically reorders consumables.

Dash Replenishment is an extension of the initial Dash program that provides a physical, Wi-Fi enabled button that consumers can mount and press when they need those consumable products that keep appliances such as coffee makers operating. In another variation on theme, Amazon develop the Virtual Dash Button Service an SDK that allows third parties to offer virtual Dash Buttons on their screened devices. Virtual Dash Buttons are shortcuts that allow Prime members to quickly find and reorder favorite merchandise from a selection of eligible products.

Although not yet a major consideration, Alexa-enabled voice commerce capabilities could help Amazon create a new frontier of food and consumables retailing. Straight on ordering via Alexa may not be a great advance over Dash Replenishment, but Amazon could in the not-so-far off future enable basic meal planning through voice commerce. A consumer could chat with Alexa about potential meal choices then have the system order the necessary components in the necessary quantities.

“If I say to Alexa, give me ideas for dinner, and she says, ‘Something like chicken francese like you had last week? And I’ll put all the items in your basket and it will be at your door tomorrow,’ that’s game changing,” Stern said “Game changing is predictive analysis, then she takes care of it.”

According to an OC&C Consultants study, 62% of consumers who have an Alexa-enabled device or other sort of so-called smart speaker, has used it to purchase merchandise. The study projects that 55% of U.S. homes will include a smart speaker by 2022.

Currently, 10% of U.S. households include an Amazon Echo product while 4% include a Google smart speaker and 2% a Microsoft Cortana device. The focus of voice shopping is inexpensive often replacement items but that might bode well for weekly food and consumables purchasing. Consumers might not buy their steak through Alexa, but they just might buy their steak sauce. Trust also is an issue, particularly when recommendations are a factor.

The fact that 10% of homes already have an Alexa device suggests relatively rapid adoption.

“It’s safe to say that smart speakers are getting adapted fast compared to other technologies,” said Eric Stutz, an OC&C consultant. Consumers may take awhile to get around to shopping via voice commerce and getting a first order right can be a bit problematic given the need to be exact in ordering, Stutz pointed out.

However, once they do order via Alexa, or Google Home, a device that links into Walmart e-commerce, replenishment is much easier and consumers tend to favor products where they don’t have quality or shipping concerns, such as snacks and beverages. Stutz added that as voice commerce technology improves, making ordering easier, “we think it will accelerate.”

Voice commerce represents still another way Amazon can make inroads into food retailing.

Still, big successful companies have been known to get themselves in trouble when they expand beyond their core expertise, and that could happen to Amazon, cooling the company’s ardor for the food business.

“In a sense, that’s what’s happening at Whole Foods, they’re messing around with the culture,” Stern said, adding that Amazon “found out when they tried to deliver groceries to people’s homes, that isn’t easy. Amazon Fresh wasn’t working. People discovered Fresh Direct is better, that others were doing it better than them.”