Amazon, yet again, made headlines when it announced the acquisition of Whole Foods for a staggering $13.7 billion. Amazon though is buying more than just Whole Foods’ 440+ stores—they’re buying proximity to U.S. consumers. By acquiring Whole Foods, Amazon is now within five miles of 25% of Americans; however, these new consumers are not your run-of-the-mill Americans. Whole Foods purposefully opens stores in dense urban areas where shoppers have disproportionately high-income levels and purchasing power.
Washington, DC is a prime example of Whole Foods’ strategy. Across a population of roughly 600,000 people and of that population, 33% live within one mile of a Whole Foods store and 81% live within three miles.
In terms of income, demographic analysis uncovers a notable difference between a “Whole Foods Zip Code” and the rest of the nation. On average, annual median income in Whole Foods zip codes is roughly $75,000 compared to the national average of $53,000. The result of this acquisition for Amazon, then, is a presence that represents a much higher proximity to wealthier customers who exercise significantly greater purchasing power than average.
Amazon will be leveraging that proximity to pursue its strategic goal of entering the $600 billion grocery industry to obtain an even greater share of consumer spending. The company has already experimented with high-tech grocery stores; opening its first Amazon Go store in Seattle. That format could very well be the model for the grocery store of the future.
The Whole Foods acquisition also provides Amazon the footprint and distribution reach needed to expand its Amazon Fresh and PrimePantry offerings in a fashion that will also allow it to significantly reduce costs. Offering the same “to the home” convenience for groceries as countless other items, Amazon will be positioned to disrupt the traditional grocery model, if not local retail as a whole, in ways that will force a complete reimagining of the strategy and execution of today’s chains.