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Prime members can now pick up their groceries from Whole Foods Market stores in as little as thirty minutes without leaving their car.

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Amazon's net sales increased by 39% to $52.9 billion and operating income rose to $3.0 billion for the second quarter.

Continued focus on Alexa

Amazon continued its focus on Alexa into the second quarter.

Alexa is now compatible with over 13,000 smart home devices from over 2,500 brands, and the Alexa Skills store now offers more than 45,000 skills.

The quarter also saw Alexa moving into to a number of new locations, such as Marriott-owned hotels in the US and the French market.

The Alexa and Echo launch in France offered an all-new Alexa experience built from the ground up for French customers. Amazon also launched Echo Spot in India and Japan, enabling these customers to experience Alexa with a screen for the first time.

Jeff Bezos, Founder and CEO of Amazon, said "We want customers to be able to use Alexa wherever they are. There are now tens of thousands of developers across more than 150 countries building new devices using the Alexa Voice Service, and the number of Alexa-enabled devices has more than tripled in the past year".

Amazon are planning to launch Alexa and Echo in Italy, Mexico and Spain later this year.

Expanding Prime benefits

Amazon has continued to expand its Prime member benefits internationally this quarter.

Prime launched in Australia, in what Amazon called "the most extensive set of Prime benefits at launch for any country". Australian customers were offered unlimited free delivery on local and international items, Prime Video, Reading, Twitch Prime and access to exclusive deals.

Furthermore, same-day delivery has launched in select cities in Italy and Spain, Prime Music and Reading was introduced in Italy, Spain and France, whilst Prime Student was introduced in Japan.

The expansion of Prime benefits has helped Amazon extend its global reach, locking more and more shoppers into the Amazon eco-system.

Whole Foods Market highlights

Prime benefits have also launched at US Whole Foods Market stores nationwide, offering Prime members 10% off hundreds of sale items as well as deep discounts on popular products.

Amazon is also continuing to expand its grocery delivery service from Whole Foods Market stores to more than 20 cities in the US. Customers can enjoy ultrafast delivery through Prime Now when they spend over $35.

Since Amazon acquired Whole Foods Market, Prime has essentially become the retailer's rewards and loyalty programme. This encourages new Prime sign ups and provides Amazon with valuable insight regarding the in-store purchases of its members.

Forward outlook

Amazon has forecasted favourable results for Q3.

Net sales are expected to be between $54.0 billion and $57.5 billion. This could be a growth of between 23% and 31% compared with the third quarter of 2017.

Operating income is expected to be between $1.4 billion and $2.4 billion, compared with £347 million in the third quarter of 2017.

Rachel Britton

Rachel Britton

Research Analyst
13 September 2018, Amazon Fulfilment Centre, Tilbury, Essex

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Amazon Prime Day started on 16th July this year, with over 100 million products purchased worldwide.

Best sellers were the Fire TV Stick with Alexa Voice Remote and Echo Dot, making this the biggest shopping event ever for Amazon devices.

Driving Amazon device sales

Prime Day typically features large discounts on Amazon devices to help lock shoppers into the Amazon eco-system. The special prices tempt shoppers into buying Amazon products that they then become reliant on.

July 16th was the best day ever for Fire TV devices and Kindle e-readers on Amazon globally. It was also the biggest event ever for Echo devices with screens, Echo Show and Echo Spot.

The event was also a large success for smart home device sales, with over a million products sold. Amazon's recent home security acquisition Ring had its biggest day ever on Amazon, with the Ring Video doorbell selling out.

This year Prime Day was extended from the usual one day to a day and a half, with members enjoying access to the deals 12 hours earlier. Jeff Wilke, CEO Worldwide Consumer at Amazon, said "Prime Day offers us a unique opportunity to thank Prime members with our best deals. Extending Prime Day to a day and a half this year allowed us to further reward members with unbeatable deals, access to exclusive new products and unforgettable experiences that highlight the many benefits of a Prime membership".

Source: Amazon

Encouraging Prime memberships

Amazon uses Prime Day deals as a way to encourage new Prime memberships. The deals are exclusive to Prime members, so if a shopper wants to access large savings on Prime Day, they must subscribe to the service.

Amazon Prime is a subscription service that gives the shopper access to a number of benefits. Prime members get free two-day shipping and same-day delivery on a number of items, as well as access to the Prime Now rapid-delivery service, Prime Video, Prime Music, Prime Reading, Twitch Prime and Prime Photos. Prime members can also get deep discounts on select popular products at Whole Foods Market plus an additional 10 percent off hundreds of sale items.

Prime recruitment was a large success this year, with Amazon welcoming more new Prime members on July 16th than any previous day in Amazon history. Furthermore, a record number of Prime members shopped across 17 countries. For the first time, members in Australia, Singapore, the Netherlands, and Luxembourg participated in the event.

An omnichannel Prime Day

For the first time, US Prime members celebrated Prime Day with a week of savings at Whole Foods Market.

Customers that spent $10 in store received $10 to spend with Amazon on Prime Day. Amazon Prime Rewards Visa card members also received double the rewards and 10% cash back in Whole Foods Market stores.

Amazon stated that members 'saved millions of dollars at Whole Foods Market with Prime Day deals'.

These significant incentives help to demonstrate the value of Prime membership for Whole Foods Market's customers.

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As Amazon completes the national roll-out of its Prime member savings program at Whole Foods Market, we looked at how it is being executed at store level.

Through this program, Amazon Prime members access additional savings on sale items in addition to deep discounts on selected products. The retailer is promoting this program in-store in several ways.

Information desk

An information desk, located at the front of store, is used during peak trading periods. Store associates are available to answer questions about the program and provide details on the current deals. This provides the program with a highly visible presence as soon as customers enter the store.

Source: IGD Research

Special deals signage

During our visits, we noted several special deals which were available to Prime members only. These included a $2 saving on organic cherries and a Buy One Get One Free promotion on organic lemonade. In addition to eye-level signage, large hanging banners were also placed above deals. This will likely be a key mechanic in driving new Prime memberships, particularly for regular Whole Foods Market shoppers.

Source: IGD Research

Bulk displays

Bulk displays were in place for some of the Prime deals across the store. These featured a large banner highlighting ‘A special deal just for Prime members’. These were located in high traffic areas, maximising the impact of the program.

Source: IGD Research

10% additional savings

Bus-stops were used throughout the store to highlight the additional 10% savings that Prime members can make on all promoted products. Give the black and yellow colour scheme, which is often used by retailers on low-price signage, these were among the most eye-catching elements.

Source: IGD Research

Improving the value proposition

Since Amazon acquired Whole Foods Market last year, there has been an expectation that Amazon would focus on improving pricing at the natural and organics retailer. It continues to face increasing price-focused competition from specialists such as Sprouts Farmers Market while Albertsons and Kroger are building on the success of their natural and organic private brand ranges with new products. This program will support efforts to deliver a stronger value proposition, building on earlier, smaller-scale initiatives.

While operating a two-tier pricing model may appear counterintuitive, as it highlights the higher price that most customers will pay, US shoppers are accustomed to this approach. Many grocery retailer loyalty programs offer members significant price savings. However, they can be accessed without a membership fee. What will be interesting to see is the impacts in terms of driving the recruitment of new Prime members and delivering additional traffic to the stores from existing Prime members as they benefit from the enlarged Amazon ecosystem.

Prime Day promotions

Several promotions linked to this year's Prime Day reinforce the key role that the Prime membership program is playing at Whole Foods Market. Prime members who spend $10 at Whole Foods Market between July 11 and July 17 will receive a $10 Amazon account credit to use on Prime Day. Amazon Prime Rewards Visa card members will receive double the rewards, 10% cash back, when shopping at Whole Foods Market from July 14 to July 17. Prime members who have not yet tried grocery delivery from Whole Foods Market stores via Prime Now will receive $10 off their order when they shop before July 17, and will get $10 to use towards a future order. These are significant incentives which also help to demonstrate the value of Prime membership for Whole Foods Market's customers.

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