Page 2 - Case Study_Grocery Wars

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Chapter 3 Information Systems, Organizations, and Strategy 117

of the upscale market should grow, even as it offers Walmart is the largest seller of groceries in the
discounts to lower-income Americans. United States, and with Sam’s Club, accounts for
Amazon started making changes to Whole Foods about 18 percent of the grocery market. Grocery ac-
as soon as the acquisition was completed in August counts for 56 percent of Walmart’s total sales, and
2017. The day the acquisition went through, prices grocery shopping is a major driver of store traffic and
of many Whole Foods staples dropped. Prices of customer loyalty. The company is intent on main-
some items decreased by up to 40 percent. An identi- taining its position as the leading U.S. grocer. Walmart
cal basket of items from a Whole Foods location in has invested and tested in click-and-collect programs,
Brooklyn went from $97.76 pre-acquisition to $75.85 stand-alone grocery pick-up sites, and scanning and
post-acquisition. In November 2017, Whole Foods paying for items with smartphones. Grocery is where
announced another round of price cuts, with a focus Walmart really shines. If Walmart loses the grocery
on holiday staples and best-sellers as well as Whole battle to Amazon, it has no chance of ever overtaking
Foods’ private-label 365 line of products. Amazon as the world’s largest e-commerce player.
In February 2018, Amazon and Whole Foods Online grocery sales were a key part of Walmart’s
launched a test to deliver groceries and other goods e-commerce sales growth in 2017, and management
directly from Whole Foods in four cities across the expects online grocery expansion to be the main
United States. Whole Foods was basically used as an driver of Walmart’s sales growth going forward. But if
kho chứa Amazon depot. Customers can order fresh produce, Walmart wants to meet their goal of 40 percent growth
seafood, meat, flowers, baked goods, and dairy prod- in online sales in 2018, it will have to do even more.
ucts for delivery, with items arriving at their door- Management rolled out same-day grocery delivery to
step within two hours. The company plans to roll 100 markets by the end of 2018, covering 40 percent
out the service through Prime Now to more cities. of U.S. households. Deliveries are handled by Uber
Later in February, Amazon extended its 5 percent Technologies and other providers, with a $9.95 service
cash-back benefit to Prime members shopping at fee for a minimum $30 purchase. Walmart’s online
Whole Foods with the Amazon Prime Rewards Visa order and pickup service was available at 2,000 stores
Card. Selected Whole Foods stores have begun selling by the end of 2018. Management is hoping growth will
Amazon technology products, including the Amazon continue to increase year over year with rollout of
Echo voice- controlled speaker system, Echo Dots, new stores into the online order and pickup program.
Fire TV, Kindle e-readers, and Fire tablets. The move into home delivery will help get more
Whole Foods announced that Amazon Prime of Walmart’s in-store shoppers to start buying online
would replace Whole Foods’ loyalty program. And as well, where they typically spend twice as much. It
Whole Foods goods are now available on Amazon. also complements Walmart’s rollout of curbside gro-
com, AmazonFresh (Amazon’s grocery delivery ser- cery pickup, now available in 1,200 stores and adding
vice), Prime Pantry, and Prime Now. Some Whole an additional 1,000 this year.
Foods stores have added Amazon Lockers, allowing Walmart will compete against Amazon’s Prime
customers to have their Amazon.com orders deliv- Now service, which offers free two-hour delivery
ered to a secure location inside certain Whole Foods to members of its loyalty program. Both companies
stores until it’s time to pick them up. Customers can have also introduced services that allow delivery
also use lockers to return Amazon items. Amazon people to enter homes and leave packages inside.
and Whole Foods are integrating their point-of-sale How will the rest of the grocery industry fare as a re-
systems to enable more of Amazon’s brands to be sult of these developments? Amazon terrifies competi-
available at Whole Foods, and vice versa. tors because it can offer such low prices on so many
Buying Whole Foods represents an escalation of different categories of items. If Whole Foods follows
Amazon’s long-running battle with Walmart. Walmart this playbook, shoppers can expect prices to fall, and
is the world’s largest and most successful physical other grocery industry players will suffer. Stocks for
retailer, while Amazon dominates the online com- Kroger, Costco, and Dollar General all fell more than
merce space. Each wants to move into the other’s six percent when Amazon announced the Whole Foods
turf: Amazon would like to have a more formidable acquisition. The merger might be even worse news for
physical presence as well as online, while Walmart is Instacart, the grocery-delivery service that has had a
making a big push to expand in e-commerce. close relationship with Whole Foods.