Amazon buys Whole Foods, and it has a lot to do with data.
The retail industry has relied on data for decades. Since the 1970s, when point-of-sale systems were introduced to replace limited electronic cash registers, retailers could start tracking transactions and tie them to orders and buyers in order to start managing inventory with more certainty. And the important of retail data was born.
Over 58% of executives report that they have invested over $100M in data in order to get ahead of the curve. In the Amazon world, every transaction is recorded, every buyer is known, every inventory movement is known, and perhaps more importantly, every possible next order can be suggested based on what visitors buy and browse. This playbook, based on the belief that all data must be collected, analyzed and used, is drastically different from retail’s traditional way of thinking.
What Amazon wants from Whole Foods: Data on shopping habits
The deal stands to net Amazon a wealth of data-driven insights into how shoppers behave offline - insights that are potentially very lucrative.
Amazon has been quiet on its specific plans so far, but analysts are enthusiastic about the possibilities. Amazon is a pro at using data on past shopping and browsing to prod you to buy more. Whole Foods can help by giving Amazon a better understanding of what people do at physical retail stores, where 90 percent of worldwide retail spending still happens, according to eMarketer. Amazon could learn whether a particular customer tends to come once a month to stock up, or make smaller and shorter visits more frequently. Wi-Fi hotspots in stores might collect unique signals emanating from smartphones to figure out which aisles customers spend the most time in. Same with sensors on product shelves, something Amazon is currently testing at a convenience store in Seattle.
Big Brother Marketing?
Amazon will be able to use grocery data to drive other purchases as well. Say you buy a lot of ingredients typically found in Asian recipes. Amazon might then suggest a Thai or Japanese cookbook. It might also recommend a new rice cooker.
It works the other way, too. If you just watched a Mexican food show on Amazon video, Amazon might point you to deals on avocados and perhaps offer subscriptions for regular deliveries of tortillas and canned beans. Or it might automate a grocery shopping list based on a chosen recipe on your Kindle e-reader. Just bought some camping equipment? Amazon might offer granola bars and other ready-to-eat meals for your hikes. Likewise, someone who just bought a fitness tracker might be in the market for more produce.
It's a powerful union, and one which will grow even stronger with the collaboration of technology and data.