Andy Swan is co-founder of LikeFolio, a company that provides social-media data to investors.
Our company, LikeFolio, uses Twitter (TWTR) data to discover insights into consumer behavior. And our data from August shows that Amazon’s (AMZN) acquisition of Whole Foods may already be affecting how Americans shop.
To analyze consumer behavior, we look at so-called purchase-intent mentions. For Whole Foods, this means the use of phrases like “shopping at” or “just got some ____ at Whole Foods”, etc.
As you can see, purchase intent mentions spiked around the closing of the merger, especially as customers started tweeting about the new, lower prices.
This kind of enthusiasm spike at the beginning of a merger is a good sign for the company moving forward, because it suggests that consumers are excited about the combination of the companies. But we also want to dig a little deeper and ask why Amazon chose Whole Foods what it needs to do to make the acquisition successful.
Why did Amazon choose Whole Foods?
Reason One: Clearly Amazon would like a bigger stake in the huge grocery business. The grocery business in the US alone is about $675 billion per year! In fact, Americans spend about 9-12% of their income on groceries and on a consistent basis, which will help to provide the still-cyclical Amazon with a consistent stream of recession-resistant revenue.
Reason Two: Physical distribution points. There are more than 460 Whole Foods Stores across the US, Canada and the UK. With this many physical locations, Amazon can roll out perishable goods in a fresh, efficient fashion. Essentially Amazon is purchasing established, refrigerated distribution points that are within a few miles of most Americans.
Reason Three: Consumers like Whole Foods. As we can see from LikeFolio social-data in the chart below, Whole Foods customer sentiment levels are currently at 72% positive. While that’s down significantly over the past few years, it’s still better than the average grocery store chain numbers of 60-65% positive.
Whole Foods customers like the idea of buying from a grocery that is known for selling healthy/fresh foods. And as of last week, the grocery store also known as “whole paycheck,” because of its high prices, dropped prices, which will certainly make them even more likable.
Amazon acquiring Whole Foods could make grocery shopping more accessible, more affordable and might even attract more customers to the store, likely making consumers happier and more loyal to the brand, as they have been with Amazon over the years.
What will make this acquisition be successful?
The company has said it is going to focus on four areas to make this acquisition successful.
- Decrease prices. We saw this already starting to happen last week.
- Go Prime. Eventually, Amazon Prime members will automatically be enrolled in the Whole Foods rewards program.
- Soon, we’ll start to see Amazon use its massive shopping platform to offer Whole Foods products through Amazon sites like Amazon.com, AmazonFresh, Prime Pantry and Prime Now. This could be particularly beneficial for Whole Foods, as LikeFolio saw Kroger’s consumer happiness levels increase significantly after rolling out their very popular ClickList pre-ordering program.
- Integrate. Finally, they will introduce Amazon lockers in stores (the lockers will allow customers to come in store and pick up their Amazon.com orders while shopping at Whole Foods).
These four objectives align Whole Foods’ locations and commitments to quality with what Amazon does best…efficiency.
Of course, this is just the beginning of the Amazon/WholeFoods story, and we’ll be keeping a close eye on consumer happiness and purchase intent levels over the next 6-12 months to see if Amazon can continue executing on its key objectives as well as the data suggests it did during the first week.
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