Loyalty programs aren’t just tied to eggs, milk or produce. With the rollout of savings tied to Amazon Prime in Whole Foods Market, which Amazon bought in 2017, loyalty programs are expanding beyond the supermarket to encompass more than groceries and have a built-in audience. Those that peruse the aisles at Whole Foods may very well be taking advantage of Prime’s two-day shipping as they browse Amazon’s website: Sixty percent of Whole Foods shoppers also happen to be Prime members. Currently, 90 million U.S. consumers are already members of Amazon Prime.
With the rollout of Amazon’s program, which began in mid-June, stores in the grocer’s pantheon will offer as much as 10 percent off on sale items. And, in an effort to reduce friction, Amazon’s Whole Foods app provides a few options for Prime members to take advantage of special deals at the checkout counter: They can either scan the app’s Prime Code at checkout or provide their mobile phone number. The deals also aren’t limited to Whole Food’s brick-and-mortar stores, as customers can receive Prime member savings through delivery orders from Whole Foods Market stores via Prime Now.
And now, Amazon is bringing its annual retail holiday “Prime Day” to Whole Foods. This year, in celebration of the shopping holiday that Amazon invented, Prime members will get a $10 Amazon gift card for shopping at Whole Foods during the 36-hour shopping extravaganza. Amazon also said in a statement that it is offering customers “an additional 10 percent off hundreds of sale items throughout Whole Foods Market stores and deep discounts on select popular products.”
Even prior to the Prime Day news, Amazon reported that feedback on the program has been “overwhelmingly positive.” In fact, Amazon Prime Vice President Cem Sibay said in an announcement that “Prime members have adopted this benefit at one of the fastest rates we’ve seen.” And these customers have tremendous spending power: Amazon Prime members outspend non-Prime members by nearly two to one, with Prime members spending an average of $1,300 a year compared to just $700 a year for a non-Prime customer.
Going forward, the idea could expand beyond the walls of Whole Foods, as Amazon Prime can be an onramp to a local community of sellers who need foot traffic to their stores to compete. As a result, local merchants could stop spending money on third-party apps and loyalty programs that require a huge spend on customer acquisition to get a small number of consumers to convert — only then could the retailer have a relationship with the customer. However, not all retailers are taking Amazon’s approach to loyalty.
Competing On Price
Walmart is gearing up to square off with Amazon across all retail fronts, and European price cutters, like ALDI, is ready to compete on the grocery front, where it has been heavily investing in lowering prices. As a result, Walmart is pushing the largest decline in food price in decades. The retailer is paying out to undercut the competition and test-driving strategic price drops on food and household goods sold, particularly at Walmart locations in the Midwest and Southeast. According to data from Wolfe Research, Walmart’s basket price for grocery products is 5.8 percent lower than the average in the greater Philadelphia area. The difference was 4.9 percent in Atlanta and 2.7 percent in Southern California.
It’s not an entirely new tactic. Walmart, since its inception in the 1960s, has focused on lowering prices, yet, in recent years, that focus had been pushed from the forefront. That pushback, as it turned out, was poorly timed, as it was inadvertently concurrent with the rise of smartphones, Amazon and “showrooming.”
Now battling back, Walmart has been pushing to lower its prices for the last two years. Megan Crozier, Walmart’s senior vice president of packaged goods, said the mega-retailer wants its prices to be 15 percent lower than its competitors’ 80 percent of the time. In fact, that’s Walmart’s mission. “It’s why we exist,” Crozier said.
A New Loyalty Focus
By contrast, Target is doubling down on loyalty programs. As growth of Target-branded payment cards has slowed, the retailer is beginning to experiment with a new rewards program dubbed “Target Red.” The new program will not be linked to a debit or credit card, The Star Tribune reported in March.
“We know not everyone wants another credit card,” Joshua Thomas, a Target spokesperson, told the newspaper. “So, we want to find a way to grow our relationship and affinity with those guests.”
Originally, Target was offering a 5 percent discount on purchases through its REDcard program, along with shipping benefits on its eCommerce website. As a result, almost a quarter of all Target purchases are now made with a Target REDcard. But, with the new free program available in the Dallas-Fort Worth area, shoppers can take 1 percent off purchases and put it toward future visits at Target — without having to use a Target-branded credit card.
In addition, members of the program can waive the $5 charge for Target Restock. They also can receive 50 percent off the first year of a Shipt membership, showing that loyalty programs can extend beyond the four walls of a brick-and-mortar merchant.