Amazon Fresh vs. Whole Foods vs. All of Grocery

While Amazon reported phenomenal fiscal first quarter sales overall on April 29, its brick-and-mortar grocery stores have performed less well. Sales at the Seattle-based company's physical grocery stores, which is comprised mainly of some 500 Whole Foods Market locations but does not include sales originating online and fulfilled from them, like Prime delivery, decreased by 16% to $3.9 billion in the quarter. 

The pandemic has favored one-stop-shop conventional supermarkets over specialty stores like Whole Foods, but how has the e-tailer’s more budget-friendly Amazon Fresh, of which there are currently 12 locations, fared in the past six months and how are the two Amazon-owned brands stacking up against the competition and each other? 

To learn more, WGB connected with Chief Strategy Officer Michael Della Penna of InMarket, a provider in 360-degree consumer intelligence and real-time activation for thousands of major brands, which recently conducted a location data assessment of 80,000 anonymous shoppers across 10 Amazon Fresh stores and 10 Whole Foods locations from September 2020 to April 2021. The Whole Foods locations were selected based on their proximity to Amazon Fresh locations.

Jennifer Strailey: Based on your assessment, Whole Foods Market and Amazon Fresh have very different shoppers and aren’t in competition with each other. Who are the main competitors to Amazon Fresh and how does this mid-market grocer stack up?

Michael Della Penna: You are correct that there is little crossover between Amazon Fresh and Whole Foods. In fact, we found that between 1% and 2.5% of Whole Foods customers visited an Amazon Fresh over the past six months. It’s still in early stages, but Amazon Fresh’s main competitors are likely to be local independent or small health and natural regional chains, as well as mid-market grocery chains like Stop & Shop and Key Foods, rather than more luxury or specialty grocery brands.

One major factor that separates Amazon Fresh from its competitors is the service’s expertise in delivery. While competitors had to adapt to the circumstances of the pandemic with services like curbside pickup, Amazon Fresh has an established delivery infrastructure that gave shoppers access to their groceries without having to leave their homes. There are also member benefits, like shoppers receiving a 5% cash back reward for using an Amazon Prime Rewards Visa Signature Card or Amazon Prime Store Card at checkout.  

You describe Amazon Fresh as a mid-market option “popular with more frugal and diverse shoppers” than Whole Foods. How so?

We found Amazon Fresh to outpace both Whole Foods and the national average in appeal to Asian and Hispanic shoppers. According to our analysis, an Amazon Fresh shopper is 3.6 times more likely to be Asian than the national average, compared to 2.7 times at Whole Foods. Additional differences were found in income, occupations as well as with the presence of children.

When you combine demographics with other attributions such as psychographics to understand the motivations of shoppers, the differences are even more stark. We applied InMarket’s GeoTypes to our analysis, which combines up to a thousand different attributes to understand shopper personas and motivations and found that Amazon Fresh shoppers cut across a larger number of personas compared to the Whole Foods shopper. Amazon Fresh’s top four personas accounted for only about 31% of all shoppers and overindexed most with “affluent savers,” “value seekers,” “persevering parents” and “frugal epicureans.”

Compare this with Whole Foods, where the top four shopper personas accounted for nearly 50% of all shoppers, and overindexed highest across “focused and on-the-go,” “mature and assured,” “healthy and wealthy” and “household organizer”—demonstrating an appeal to very different segments.

One could say that Amazon is building a grocery business that closely resembles that of a car manufacturer, appealing to Honda and Acura buyers with Fresh, and Lexus with Whole Foods.

Whole Foods’ performance has suffered since the pandemic and your report indicates that traffic is down. How has Amazon Fresh fared?

It is true that foot traffic to Whole Foods has decreased over the past year. In fact, we looked at trends in visitation in third-quarter 2020 and found a 40% decline in total visitation across that time period from pre-pandemic rates. While in-person shopping has rebounded as more shoppers are vaccinated, we can attribute Amazon Fresh’s impressive loyalty to an appeal for contactless shopping, as well as the power and recognition of the Amazon name along with the initial popularity of a new and exciting concept.

Amazon Fresh and Whole Foods are attracting different types of shoppers and tailoring experiences to meet the needs of their customers. Although Whole Foods has an established reputation and customer base, Amazon Fresh presents a new and unfamiliar concept to shoppers with a well-known, familiar and respected name—Amazon. Despite its business model being fairly new in the market, with only 12 locations, the rate of shopper return for Amazon Fresh is a positive sign for the chain. 

What does this assessment tell you about the future success of Amazon Fresh and Whole Foods Market? What do you see happening with these brands in terms of shopper traffic, customer loyalty, etc., as we move out of the pandemic?

Amazon is using its vast resources to build a grocery business that can challenge more established brands for a share of the $658.1 billion supermarket and grocery store industry. With the emergence of Fresh, Amazon is growing its footprint in grocery by establishing their brand as a mid-market competitor using technology, convenience and selection to achieve lower prices. At the same time, this “whole foods for everyone” approach is attracting more diverse, slightly lower income, and more family-oriented customers.

While the immediate concern with Amazon Fresh’s emergence was Amazon’s cannibalizing its own customer base within the same sector, the opposite is proving true. Even after we move out of the pandemic, Amazon Fresh shoppers’ attention to cost-efficiency and convenience will guide their shopping habits and most likely drive their continued loyalty to the chain.