Feb 21, 2018

Want To Turn $99 Into $658.38?

Amazon's announcement that its co-branded Amazon Prime Rewards Visa credit card will now offer a 5% cash back reward on all purchases at Whole Foods is just one more shopper incentive that will gain market share for the chain.

The $99 per year Amazon Prime membership is quickly becoming the most valuable membership for shoppers, with free same-day delivery in some areas, two-day shipping and unlimited streaming of movies, TV shows, books, magazines and music. The no-fee Amazon Prime Visa credit card also gives consumers 2% back at restaurants, gas stations and drugstores and 1% back on all other purchases, with an instant $70 Amazon.com gift card upon approval.

This new perk with the credit card, which undoubtedly many Whole Foods shoppers will start to take advantage of, will also give Amazon Whole Foods an important tool that has been lacking – shopper data from Whole Foods – which will then enable the retailer to target special offers and more.

IBM's Customer Loyalty Trends Report points to three trends that are accelerating the growth of these programs: personalization, omni-channel and connected devices. Amazon is arguably the leader in personalization, which according to the IBM report is "offering the right incentive, in the right amount, targeting the right behavior, in the right channel, at the right time." It goes without saying that Amazon's omni-channel grocery strategy is now well ahead of the competition with Whole Foods, Amazon lockers, Amazon.com and delivery.

According to the 2015 Colloquy Loyalty Census, the average household participated in 29 different loyalty programs. These have become a juggling nightmare for a shopper, and other programs like Plenti have attempted and failed to unify programs across different retailers. Amazon's program is simple since you can buy almost anything from them. This new credit-card-based program will offer customers refuge from trying to remember phone numbers or carrying cards and should drive more sales to Amazon Whole Foods, for both the rewards and the simplicity.

The USDA has created four food plans: thrifty, low-cost, moderate-cost and liberal. Each of these calculate, by age and family groupings, the average monthly cost based on a nutritionally balanced market basket from the current Dietary Guidelines for Americans. The liberal plan most closely matches what the Whole Foods shopper would purchase, and for a family of four – with two children between 2 and 5 years old – the average monthly spend for food at home (as of January 2018) is $1,097.30 per month, or $13,167.60 annualized.

The savings of $658.38 with the card perk is probably understated as Whole Foods shoppers are more inclined to spend more on organics and other higher-priced foods. And then there is the reality that many surveys have shown that shopping at Whole Foods is costlier than at other supermarket chains, so for shoppers that are not currently shopping at Whole Foods the savings might not offset the higher cost than from their current store. There is little doubt that Amazon's approach to building a relationship with Whole Foods shoppers is based on value and rewards and will be hard for other grocery retailers to match.


by Phil Lempert