With Miriam Cross, Associate Editor, Kiplinger’s Personal Finance
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In August 2017, Amazon closed its acquisition of Whole Foods. In its press release, Amazon said it the two companies would “work together to make high-quality, natural, and organic food affordable for everyone.”
The announcement took the grocery world by storm. Many wondered how Amazon might bring its tech genius to the highly competitive brick-and-mortar grocery business. And Whole Food shoppers hoped the acquisition would make Whole Foods more affordable.
Now, a year later, Steve speaks with Miriam Cross on whether the acquisition has started to deliver on its promise. Miriam is Associate Editor at Kiplinger’s Personal Finance.
Miriam used to shop at Whole Foods and was a happy customer until some disgruntlement set in a year into the acquisition. She tried to put a finger on what wasn’t quite right after the acquisition. Her findings appear in a Kiplinger article titled “How Amazon Ruined Whole Foods (Or Maybe Not)”.
Notable Changes At Whole Foods
Miriam lists the most notable customer-facing changes at Whole Foods since Amazon’s takeover.
Whole Foods now has a lot more electronic gadgets in the store, fewer local products, and a lack of coupons. In addition, there is a lot more blue signage targeted at Amazon Prime customers.
Whole Foods Geared To Serve Amazon Prime Customers
Before the acquisition, Amazon estimated that about 61 percent of Whole Foods’ shoppers were also Amazon Prime members. Now, a year later, that percentage has risen to about 75 to 80 percent.
Amazon Prime customers enjoy perks such as an extra 10% off Whole Foods sale items and exclusive deals, such as buy-one-get-one-free.
The membership cost for Amazon Prime is $119 per year if you pay up front; $13 if you pay per month. So the extra savings might be worth the price of membership, depending on your shopping habits.
Drop In Locally Sourced Produce
Miriam noticed a drop in locally made and locally sourced products.
Before the acquisition, a lot of stocking decisions were made regionally, and small local food makers could pitch their products to their local Whole Foods.
Now, sellers have to go through the national office, and there’s more pressure on small food makers to discount their prices. In some instances, they have to pay for shelf space as well.
This is squeezing out local producers and bringing in more packaged goods and produce from larger national providers. Shoppers complain that the quality of produce has dropped and that it’s not as fresh anymore.
Electronics Takes Away from The Whole Foods Experience
Whole Foods now has an electronics section dedicated to selling Amazon devices, such as Echo and Firestick. For Miriam, this takes away from the grocery shopping experience.
Steve wonders if Whole Foods has shed the “whole paycheck” moniker it got for its pricey products. Miriam notes that price reductions have been a mixed bag.
Certain frozen foods, dairy products, canned seafood, and coffees and teas, have become more expensive. On other items, prices have dropped a little.
Steve attributes this to Amazon testing the waters to see what customers might tolerate.
No More Wine Down Wednesdays
Post-acquisition, Whole Foods appears to have cut down on store-based events. At Miriam’s neighborhood Whole Foods, they no longer have Wine Down Wednesdays or Meatless Mondays’ promotions of local produce.
Amazon has also centralized its Facebook and Twitter posts. Shoppers no longer hear of local store events and promotions.
5% Back With Amazon Rewards Card
Amazon Prime members who shop with the Amazon Rewards credit card get 5 percent cash back. Non-Prime members get 3% back, which is still pretty good for a grocery purchase.
Miriam believes it makes economic sense for regulars to sign on to Amazon Prime and get the Rewards card because the Prime-only savings add up nicely.
With just a year gone by, it’s too soon to know what else is going to change. Let’s just hope Amazon makes good on its promise of making Whole Foods more affordable.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: It’s been nearly a year since Amazon acquired Whole Foods and took the grocery world by storm. Since then, we have wondered, how would Amazon bring its tech genius to bricks and mortar? And would Whole Foods really get more affordable? Well, Miriam Cross is an associate editor at Kiplinger’s Personal Finance, and she recently wrote an article asking if Amazon’s takeover was ruining Whole Foods. Miriam joins us right now. Hey, Miriam, welcome.
Miriam Cross: Hi, thank you for having me.
Steve Pomeranz: So, notable changes to Whole Foods since Amazon’s takeover include what?
Miriam Cross: So you’re going to notice a lot more electronic gadgets in store. You may notice fewer local products. You’ll notice a lot more blue signage catering to Amazon Prime customers. You may notice a lack of coupons. And, I guess overall, a much bigger push to satisfying Amazon Prime members.
Steve Pomeranz: Yeah, well, let’s get into that. So, before Amazon owned Whole Foods, they were able to calculate the percentage of, I guess, Whole Foods shoppers that actually had Amazon Prime accounts.
What was that?
Miriam Cross: Yeah, so the group I spoke with estimates that, right before the acquisition, about 61% of Whole Foods shoppers were also Prime members. But now, about a year later, that number’s closer to 75% or 80%.
Steve Pomeranz: And you’re definitely getting some perks as an Amazon Prime owner?
Miriam Cross: For sure. A big one is sales. So even though most sales are still open to every shopper, Amazon Prime members get an extra 10% off sale items and they get some exclusive deals, such as buy-one-get-one, that are only for Prime customers.
Steve Pomeranz: I see. And it costs $99 to be an Amazon Prime member if you buy the whole year up front, but I calculate it’s over $155 if you do it on a monthly basis, so you’ve kind of got to put that into your calculations a little bit.
Of course, you get other shopping deals with Amazon Prime, but nevertheless, $150 more a year to get 10% off certain items may or may not be worth it. Are there more packaged goods now? I know they were having difficulty making money. The old Whole Foods having difficulty making money. I wondered if Amazon was putting in packaged foods now.
Miriam Cross: So that’s not something I’ve noticed personally, but I also go shopping at Whole Foods for specific purposes. But one thing you might notice is fewer locally made, locally sourced products because in the old Whole Foods, a lot of decisions were made regionally and small local food makers could pitch their products to Whole Foods.
Now there’s a different system, you have to go through the national office and there’s also more pressure on small food makers to discount their prices.
Steve Pomeranz: I think they also have to pay for shelf space as well. Is that true?
Miriam Cross: That’s another thing that’s been reported.
Steve Pomeranz: Yeah, okay, so it’s squeezing out the local producers, bringing in more of kind of the national products.
My significant other shops there all the time and she basically says there’s a lot of packaged products. She’s also has been really unhappy with the quality of the produce there. It hasn’t been as fresh. She’s had some kind of bad fennel or something that she had to take back. Have you noticed? Is there a different system there for things like produce which are perishable?
Miriam Cross: So I still think Whole Foods produce, just my own personal experience, is often better than what I get at other grocery stores. But I think I agree that I haven’t been blown away as much recently. I had some bad asparagus, my apples haven’t lasted as long as they used to. But again, it’s still better than what I get elsewhere.
Steve Pomeranz: Yeah, so you mention that there’s more gadgets. What kind of gadgets? And it seems to me if there is a limited amount of shelf space, if there’s more gadgets, then there’s less variety.
Miriam Cross: Yeah, and for me, it also just takes away from the atmosphere of this beautiful, shiny grocery store when you have electronics in cases. So I saw this myself. I went to the nearest Whole Foods to me, and they had a case where they sold the Echo, the Echo Dot, the Echo Show, the Echo Spot.
I do not even know the differences between all of those. Amazon Firesticks, tablets, Kindle Paperwhite. The prices were pretty much identical to what I found on Amazon.com. So I guess one upside there is if you want one of those products, you can buy it right away rather than waiting for it to come in the mail.
Steve Pomeranz: Whole Foods was starting to lose its reputation. The cost of buying products there was rising. Remember they called it Whole Paycheck instead of Whole Foods?
Miriam Cross: Mm-hmm.
Steve Pomeranz: Has Amazon’s, in fact, purchase of Whole Foods led to lower prices?
Miriam Cross: That is a great question. And I found it’s really a mixed bag because they made a big deal, right after they acquired Whole Foods, of lowering prices on really popular products.
Then there were reports afterward of prices creeping back up or prices on other items were raised while we were all distracted about cheaper avocados.
Steve Pomeranz: [LAUGH]
Miriam Cross: But actually one positive point is we might be seeing lower prices overall by the end of the year because Whole Foods’ largest food distributor has recently acquired another food network, expanded its wholesale distribution network. So prices actually could go down once that deal closes by the end of the year.
Steve Pomeranz: So if they, in fact, do pass those savings on to the shopper then prices should be affected?
Miriam Cross: Yeah, so that actually is a positive.
Steve Pomeranz: Now, you wrote in your article that certain foods like frozen foods, dairy products, canned seafood, and some coffees and teas have become more expensive. What do you say about that?
Miriam Cross: Yeah, so that’s again a part of the whole mixed bag of this, since they made a big deal in the news about lowering products on prices. But at the same time, I think the research I saw, it showed a lot of it actually stayed the same. Some things went down while other things such as frozen food and dairy products went up.
Steve Pomeranz: I guess there’s a feeling at Amazon is testing the waters. They’re trying figure out what sticks, what works, and it’s a big experiment for them to try to figure out a new business model.
Miriam Cross: For sure, but central to that seems to be appeasing the Amazon Prime member.
Steve Pomeranz: Now, I don’t know about my area, but I know in some areas, the Whole Foods would have wine nights, and yoga nights, and kind of other things to entice their demographic. Are they still doing that?
Miriam Cross: Not as much. I live in Washington DC, and at my old neighborhood Whole Foods they would have Wine Down Wednesdays, they would have Meatless Mondays, which was a great deal. You got as much vegetarian food as you could fit in their container for $8. Many other things too, but those have disappeared. I actually couldn’t find any special events happening in any Whole Foods in DC. And similar events like yoga nights, happy hours are happening in other stores around the country, but those are mostly stores in more profitable markets or in more competitive markets.
Steve Pomeranz: Yeah, I mean, I don’t know for sure, but it seems that you are indicating that decisions are made on a more national level and less on a local level, so we’ll start to see some of those kinds of local services go away because, again, it probably doesn’t scale up very well.
Miriam Cross: Yeah, and there are lots of little changes. Like there used to be a Twitter feed for just the Whole Foods in Washington DC where you could find reminders about events happening that night. But now there’s just one Twitter feed and I believe one Facebook feed for national Whole Foods and that’s it.
Steve Pomeranz: Now, they also have a credit card, and I read in your article that their credit card offers 5% cash back on items purchased there?
Miriam Cross: So that’s the Amazon Rewards credit card. And so Amazon Prime members can get 5% back at Whole Foods while non-Prime members get 3% back, which is still pretty good for a grocery purchase.
Steve Pomeranz: It’s pretty good, yeah, I know, any kind of credit card that offers cash back, the best that I’ve seen is 3%. There’s others that are higher but they’re only for specific items and that’s just too hard for me to follow. [LAUGH] So I like those that are just x percent back across the board. But I think if you’re going to be shopping at Whole Foods then you maybe should get the card and get 5% back, that’s pretty good. Plus they have these deals where you get an extra 10% if you’re a Prime user, so that is 15%.
Miriam Cross: Exactly, though the card also, it’s best for people who do a lot of Amazon shopping and then they should also just use this card when they go to Whole Foods.
Steve Pomeranz: All right, I’ve been talking to Miriam Cross, Associate Editor for Kiplingers Personal Finance. And we’ve been trying to figure out whether Amazon’s takeover of Whole Foods is going well or poorly. And I think it’s a mixed bag, it’s kind of a wait and see. Miriam, thank you so much for joining us.
Miriam Cross: Thank you for having me.
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