When Amazon (AMZN) announced it was acquiring Whole Foods Market (WFM), “the everything store” didn’t detail plans about what it would do with the organic food giant. However, experts and consumers immediately began speculating about how Amazon might shake up Whole Foods’ business.
One of the popular theories was that Whole Foods would drop prices to steal customers from other grocery stores. Amazon would justify this move by pushing its other goods and services to its newfound customers.
However, not everyone believes Whole Foods’ notoriously high prices will plummet after the Amazon deal goes through.
Analysts from RBC Capital Markets pointed out that Amazon tends to buy companies for their strong brand identity and mostly leave them alone. As seen when Amazon acquired Zappos, it left its business model completely intact.
“[W]e’re skeptical that AMZN bought Whole Foods with the intention of materially changing its current cost structure or in-store value proposition,” RBC analysts said in a note out Monday.
In other words, consumers who got their hopes up that Whole Foods will lower prices may end up disappointed.
So what will Amazon do with Whole Foods?
Amazon may be looking to Whole Foods to understand how shoppers behave in a physical store. In other words, Amazon could want Whole Foods for its data on customers, as the Wall Street Journal recently noted.
James Thomson, a former senior manager in business development at Amazon, told the Wall Street Journal, “If the deal goes through, the combination likely will be powerful. Amazon and Whole Foods can join their online and in-store knowledge to better predict what goods to carry in each store.”
Once Amazon has a deeper understanding of customer behavior, it could learn how to strategically place products so customers are more likely to make impulse buys. In other words, Amazon could find more ways for loyal Whole Foods customers to spend their “whole paycheck.”
Whole Foods could provide another way for Amazon to “delight” customers
Once just an online retailer for books, Amazon has expanded to become a company known to anticipate customers’ desires in many areas. “No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples,” Amazon CEO Jeff Bezos wrote in a recent letter to shareholders.
Amazon will likely use its Whole Foods purchase as a way to continue anticipating customers’ needs. “Now that Amazon has acquired Whole Foods, Amazon now has an ability to leverage Whole Foods distribution capabilities and stores to delight customers,” Brittain Ladd, a supply chain and business strategy expert, told Yahoo Finance.