Online giant looks to develop new grocery store formats

Amazon has some big plans for its newly acquired Whole Foods Market division.

Since Amazon officially added the natural foods grocer to its family, the online giant has made big moves to integrate the brand. It offered lower prices on a range of key grocery items in the stores, launched the Whole Foods private label products on Amazon, and added Amazon Lockers to select Whole Foods stores.

“It’s been lots of activity, lots of energy and we're really excited to show customers what's possible when we join forces here,” Brian Olsavsky, senior VP, CFO said on Amazon’s third quarter investors’ call on Oct. 26.

He also hinted at the company’s next big step: developing new store formats. While he would not commit to specifics on the project, Olsavsky revealed that the company is already “experimenting” with a lot of formats, and using Whole Foods as a testing ground. Crediting the company’s expertise, Olsavsky expects the Whole Foods team to bring a new perspective to a potential format concept.

“Whole Foods really gives us a vast head start on that and a great base,” he said on the call. “It’s a great team … who has a lot of history and … they probably have 10 years to 20 years of learnings that we don't have and wouldn't have. Working together, will bring our different strengths to the table and really be able to build on behalf of customers.”

In addition, the online giant is also looking to expand its Whole Food physical store count. Specifically, Whole Foods, is at a total of approximately 465 stores, but expansion is on the way, Olsavsky reported.

“We are adding a few more in the near future in California, Washington DC, and Austin. You will see more expansion from us,” he said. “We're not ready to announce what that will look like and we are working with the Whole Foods team on how many more stores we might have in that area. But it’s still early, so those plans will develop over time.”

Looking ahead, he expects even more integration between the two brands. Specifically, “there will be a lot of work between Prime Now, AmazonFresh, Whole Foods, Whole Foods products on the Amazon site, Amazon Lockers at the Whole Foods stores,” he added. “There will be a lot of integration, a lot of touch-points and a lot of working together as we go forward.”

One of those developing plans is the integration of Prime within the Whole Foods network. Specifically, both companies are exploring how to “make Prime the Whole Foods customer rewards program,” Olsavsky added. “We'll have that coming out in the future.”

The news comes on the heels of Amazon’s stellar third quarter earnings — a period that benefited from a $1 billion-plus sales infusion from Whole Foods Market. Amazon’s net sales increased 34% to a better-than-expected $43.7 billion in the quarter ended Sept. 30, compared with $32.7 billion last year. The results include $1.3 billion from Whole Foods Market, which Amazon acquired in August. Results also include Amazon’s cloud computing division (AWS), where revenue rose to $4.58 billion from $3.2 billion last year.