Business & Economy

Data to Drive Future of Amazon-Whole Foods Grocery Delivery

Thursday, February 8, 2018, By Daryl Lovell

This week Amazon announced it will begin delivering groceries from Whole Foods via Prime Now service to customers in Austin, Cincinnati, Dallas, and Virginia Beach. The company says it plans to expand the service to other U.S. cities later this year.

Why these four cities to start? Associate professor Lee McKnight in the School of Information Studies (iSchool) at Syracuse University says it’s likely the customer data sets are driving the initial pick of the delivery pilot markets.

McKnight says:

“Amazon is orchestrating their respective Amazon Prime and Whole Foods customer data sets, and their overlap, to both optimize customer experience, and learn as much as possible from the data on these first four pilots before they scale to new markets. Picking Austin, Cincinnati, Dallas and Virginia Beach to start Amazon Prime Whole Foods 1-hour delivery is no doubt itself a data-driven choice.

“Many other grocery and food retailers and distributors, who were anxious when their stock dropped after Amazon’s Whole Foods acquisition, are likely today again re-assessing their cyber-physical strategic strengths and weaknesses. Many already have somewhat analogous tie-ups or delivery service offerings. But none have the scale and market scope Amazon offers. Can they best compete by working with Amazon Prime? Or, for example, can they best serve their local markets with Uber? GrubHub? All of the above? Or can they seriously expect to continue to compete going it alone?

“Amazon must both expand Whole Foods market reach cloud-style, and avoid delivering ‘not fresh’ services anywhere for this initiative to succeed. It would leave a very bad taste in Amazon and Whole Foods customers’ mouths, if Alexa were to get a cyber-pants on fire reputation for lying about freshness and quality. Hence their modest initial synchronized service roll-out, since even Bezos cannot afford to get this wrong.”

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Julie Niederhoff is an assistant professor in the Supply Chain Management department at the Martin J. Whitman School of Management at Syracuse University. Her research addresses issues of how individuals make decisions within the supply chain and what effect these have on the efficiencies and profits of the firms. She says Amazon has new unique opportunity with this new service, but fulfillment remains a question.

Niederhoff says:

“Amazon has the unique opportunity to use the physical infrastructure of Whole Foods to bring fresh food delivery to limited test markets. Fulfillment remains a question, though. Whole Foods has long offered online ordering with in-store pick-up, but recent struggles with in-store inventory may worsen under even higher demand unless really careful forecasting is done over a (potentially) more limited list of products. However, if the orders are being fulfilled from a more centralized location, some volume benefits may allow a steady use of space and labor.”

 

 

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Daryl Lovell
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