Amazon's bid for Whole Foods is obvious and brilliant. There's a lot of crazy talk about how Whole Foods will get turned into people-less stores like Amazon's experiments in Seattle, but I think that's bunk. If you want to truly understand why buying Whole Foods is a brilliant move for Amazon, look at Zappos, not robots.
Back in 2009, it was a bit crazy for Amazon to buy another online store. Sure, it was a consolidation of online storefronts, but Zappos was and is different. The Las Vegas-based company prides itself on customer service and CEO Tony Hsieh has been given a free hand by parent Amazon to run the shop as he sees fit.
Zappos continues to live and thrive with its legendary call center services. The inbound phone call is not an enemy, but a way to build an ongoing and unique relationship with its customers. People still like to talk on the phone. A good conversation with a Zappos customer rep may result in loyal customers receiving flowers, cookies, postcards or some other “wow” gift as a thank you or consolation, depending on the context of the discussion. Sure, the company also has messaging, chat, and email, but Zappos has its 800 number on the first page of its website, so if your question or issue is urgent enough to call, you can get a live human being and one that wants to talk – not one that wants to meet quota by getting you off and on the phone within a certain number of minutes.
Whole Foods has three very important attributes that Amazon should love. First, it has a high-end brand – gee, like Zappos. People go to Whole Foods for the “best” produce and groceries and are willing to spend a couple bucks more than at traditional grocery stores. You don't hear about a beat up, run-down Whole Foods, unlike many folks with traditional supermarkets around the corner.
Whole Foods’ core values, as listed on the company's website, are focused on the customer and “delivering extraordinary customer service,” knowing by doing so that customers are turned into “advocates” for Whole Foods business. Like <cough-cough> Zappos customer service has turned its customers into loyal advocates.
The third key attribute that makes Whole Foods a winner for Amazon is retail innovation.
Let me say it again: Retail Innovation.
Whole Foods distributes money to its stores for experimentation to increase sales, such as adding bar service. Each Whole Foods store is constantly looking for new ways to increase profitability and improve operations. Amazon will no doubt let that practice continue, letting stores discover best practices and share them within the company.
Imagine what happens when Whole Foods stores combine Amazon back-end IT services with existing infrastructure. It won't happen overnight, but it will happen. Whole Foods may indeed ultimately become an Amazon distribution platform complete with Prime pickup, Prime discounts at Whole Foods and the like, but the grocery chain is likely to boost its own profit margins and supply chain efficiencies with Amazon Web Services (News - Alert) and other IT goodies long before that.
Given the amount of touch labor involved in Whole Foods, from making drinks and cutting lunch meats to customer assistance finding things, I am skeptical there will be pressure to cut checkout clerks. Instead, I see Amazon letting Whole Foods remain Whole Foods, but as a subsidiary that leverages Amazon's IT and supply chain to improve profits and service.