It’s been more than a year since Amazon made a big splash in the grocery world by purchasing Whole Foods, an acquisition that came as a surprise to many in the industry. Critics have voiced pros and cons of the merger, listing price cuts and delivery options as the bigger perks for Amazon Prime members. However, in its chance to really shine, Whole Foods failed to impress most customers during its first-ever Prime Day promotion, underperforming in almost all core customer satisfaction measures (including Overall Value, which was supposed to be the big draw for Prime Day).
In order to get a better idea of how customers have responded to this partnership over the past year, we again turned to our market intelligence tool BrandGeek®—the fastest, most accurate source of behavioral data linked to customer feedback in real time. Here’s what we found:
The Amazon acquisition drew in lapsed Whole Foods customers
The buzz of the merger was enough to bring in shoppers who hadn’t been to Whole Foods in a while. Our research showed 57% of visitors in the first 3 months of the acquisition had not been to Whole Foods in at least 60 days.
Almost half of the people whose last visit to Whole Foods was 6–8 months before the acquisition have returned since. That uptick in visits from lapsed customers could be due to the additional savings Prime members receive at Whole Foods. Stores boast special deals exclusive to Prime members, including an additional 10% off marked sale items, daily deals, and product promotions.
The merger is enticing a new demographic
The lapsed customer group includes a majority of younger shoppers with lower incomes. The acquisition appears to be drawing in more of this demographic, with a 3.2-ppt increase among Gen Z-ers and a 1.2-ppt increase with millennials. In addition, customers with an income of less than $40,000 have increased their visits to Whole Foods by 2.7 ppts.
On the flip side, the loyal group has a greater percentage of higher-income customers, whose visit share declined after the acquisition. Other premium brands are getting their share, but so are standard and value brands. With Whole Foods’ loyal customers exploring options, it’s important for the brand to figure out how to bring them back.
Whole Foods is falling short with its pre-acquisition loyal group
Though the acquisition is helping Whole Foods win lapsed customers, it’s not seeing the same success with its previous frequent shoppers. The brand is seeing a 2-ppt decline in visit share with its pre-merger loyalists.
In addition, customer experience scores with loyal Whole Foods customers are down after the acquisition. With a 3-ppt decrease in Speed/Ease of Checkout, a 4-ppt dip in Availability of Merchandise, and a 2-ppt decrease in Overall Satisfaction, it’s apparent Whole Foods is having trouble keeping up with the standards of its loyal customers.
What’s next for Whole Foods?
The first year of the Amazon acquisition proved successful in some areas for Whole Foods, more than likely stemming from Prime membership benefits. Drawing in new and infrequent customers is a great first step in establishing additional loyal customers—but Whole Foods needs to up its game when it comes to its current loyalists. Their decreased visit share and lower satisfaction scores mean Whole Foods has some work to do so these customers don’t slip through the cracks (on their way to a competitor).
The Prime Week let-down is another warning sign that Whole Foods has some kinks to work out. The Amazon acquisition lit a fire in the grocery retail industry, and other brands are keyed up to compete. Well-established brands such as Kroger and new-to-the-market companies like Lidl should not be ignored as they bring the heat, vying for customer loyalty.
If you’re interested in learning more about SMG’s market intelligence tool BrandGeek and the branded benchmarks we’re able to deliver, check out our video.
Jim Sellers | Customer Engagement Director