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How Amazon's procurement will transform Whole Foods
Unless you’ve been living under a rock, you’ve no doubt heard that Amazon has announced its plans to acquire Whole Foods, the upscale chain of grocery stores, for $13.7 billion.
Why did the deal happen?
Prior to the announcement, Whole Foods had been struggling. In February, the grocer “reported what [was] arguably its worst performance in a decade, announcing its sixth consecutive quarter of falling sales and cutting its outlook for the year,” according to the Washington Post. Those declining sales caused Whole Foods to close nine of its stores—the most it’s ever closed at once. Making matters worse, the sales dip continued into a seventh quarter. In response, Whole Foods shook up its leadership staff in May.
Sensing an opportunity to expand on its foray into the $800 billion U.S. grocery market—Amazon had already opened up two of its own grocery stores in Seattle—Jeff Bezos and company swept in and nabbed a wobbly Whole Foods to expand its physical footprint. The e-commerce juggernaut now has access to 465 Whole Foods locations in North America and the United Kingdom.
As of the result of the acquisition, we can reasonably expect that Whole Foods’ fortunes will turn around because the company will be able to benefit from the Amazon procurement process. By leveraging Amazon’s patented technology, Whole Foods can expect:
- Lower prices. With a deep-pocketed suitor on board—one that already has a large footprint of its own—Whole Foods can expect to be able to source its food, drink, and other items in a more affordable manner than it does now. The company will be able to bargain with farmers and other merchants to get the best deals, thereby lowering its expenses and passing on those savings on to its customers.
Less waste. Whole Foods can use Amazon procurement to easily determine whether they have enough of a certain item at a certain location—and whether they have too much. This will enable the high-end grocer to drastically reduce the amount of products that spoil and need to be thrown away.
- Greater selection. Amazon sells nearly 400 million products. Suffice it to say that Whole Foods will be able to tap into a large ecosystem to deliver the exact products its customers are clamoring for. At the very least, it’s not hard to imagine a wider array of non-food items available for sale under Whole Foods’ roofs.
- Improved customer experience. Amazon is known for consistently putting the customer first. To this end, we can reasonably assume that the company’s customer-centricity will transfer over to Whole Foods. Over time, the average Whole Foods shopper’s customer experience will improve. Whether that means cashierless checkouts or delivery by drone remains to be seen. Consider the facts that 75% of consumers expect a consistent experience across platforms, 64% of customers want personalized offers, and 56% of consumers are willing to share data to receive better service, and you can quickly see why the Amazon-Whole Foods deal has major potential implications for the customer experience.
It’s too soon to tell for sure, but it appears Amazon and Whole Foods are gearing up for a match made in heaven.
But most businesses can’t depend on being able to leverage the coveted Amazon procurement capabilities. The good news is that doesn’t mean they are completely out of luck—quite the contrary.
Companies that don’t envision an eleven-figure buyout in their future can still fortify and optimize their procurement process by utilizing modern e-procurement solutions that enable them to gain full visibility into their spend—thereby reducing their costs and streamlining requisitions.
If your purchasing process leaves something to be desired, it’s probably time to look for a procurement system that enables you to manage your spend and your inventory levels with precision, ensuring that you’re able to provide the most value to your customers, shareholders, and employees. To learn more about why optimizing your procurement process should be a top priority, check this out.