Whole Foods Prepping for 'Prime' Time

Whole Foods Market is terminating its pilot rewards program and will discontinue digital coupons, online memberships and other legacy loyalty initiatives effective May 1, presumably clearing the way for Amazon’s Prime loyalty programs to take over.

Whole Foods in a message to shoppers said the programs would be replaced by new features but declined to provide details. Officials, however, have said that Prime would become the loyalty program for Whole Foods.

Heavy media coverage and viral interest in the Amazon-Whole Foods pairing has resulted in sales spikes around announcements since Amazon acquired Whole Foods last summer, although the potential for significant Prime benefits for Whole Foods shoppers could have longer-lasting effects, analysts said. The company previously announced one-off deals for Prime members at stores such as a Valentine's Day flower deal and a delivery rollout from Whole Foods stores via Amazon Prime Now.

“Having already observed reasonable success with recent actions, not to mention robust media coverage, investors should be mindful that pending announcement of a Prime-based program would carry obvious headline risk for grocers and serve as a reminder of how competitive the market has become,” Chris Mandeville, an analyst with Jefferies, said in a note to clients.

Related:Whole Foods Adding Delivery Through Prime Now

Marrying Whole Foods’ point-of-sale systems to Prime in the meantime could allow Amazon to obtain greater purchasing insights and accelerate its strategy of conveying value to core customers with unique offers, Mandeville added, a move he said would "heighten competitive pressures for all grocers."

A recent report showed a Whole Foods store in Austin, Texas, experimenting with signage indicating Prime members would get a 10% discount.

Whole Foods’ lagging loyalty strategy was among the operational issues it faced at the time of the Amazon acquisition. It was testing different strategies, and the rewards program was still in the pilot stage and not available to shoppers in all of its markets. Its other online programs now being retired included digital coupons, as well as online shopping list and recipe box features and a Whole Body benefits program, which provided a 20% discount on supplements in exchange for a membership fee.

Whole Body members may be eligible for subscription refunds, the company said.