Amazon says Whole Foods sales grew last quarter

  • Amazon’s spokesperson told Business Insider that Whole Foods’ sales grew last quarter, when including online deliveries and in-store pickups.
  • The disclosure comes after Amazon reported the biggest decline in its second-quarter physical-stores sales, which doesn’t include revenues generated from online orders.
  • Whole Foods also saw almost half of its foot traffic disappear during the COVID-19 pandemic, a much bigger loss than other retailers, like Walmart and Target, according to data provided by Cuebiq.
  • It shows Whole Foods is likely generating a growing portion of its sales from e-commerce, as it’s failing to draw more people to shop at store locations.
  • Visit Business Insider’s homepage for more stories.

Amazon-owned Whole Foods may be struggling to draw customers to its physical store locations, but the grocery chain is still finding success from the COVID-driven shift to e-commerce.

In an email to Business Insider, Amazon’s spokesperson said Whole Foods’ adjusted sales — which adds online delivery and pickup orders to its in-store revenue — grew in the second quarter from last year. The company declined to share other details, like the exact growth percentage or sales amount.

“Across delivery, pickup and in-store shopping, Whole Foods Market sales grew year-over-year,” Amazon’s spokesperson said in the email.

The new disclosure, albeit scant in detail, paints a more bullish picture around Whole Foods’ results last quarter — and indicates the grocery chain Amazon bought in 2017 is experiencing a similar boost from online shoppers that other retailers have seen this year, although in-store traffic significantly decreased amid the coronavirus outbreak.

Amazon doesn’t break out the revenue generated from Whole Foods, instead looping it under a segment called “physical stores,” which includes Amazon’s small but growing footprint of bookstores, 4-star stores, and cashierless Go stores. The segment excludes sales generated from online deliveries and in-store pickups. But a significant chunk of the company’s physical stores sales are assumed to come from Whole Foods, as other Amazon-run stores are still in their infancy.

The adjusted growth in Whole Foods is particularly noteworthy because Amazon’s physical stores sales suffered its worst quarter last month. Amazon reported $3.8 billion in second-quarter physical-stores sales, a 13% drop from the year before — the smallest quarterly revenue and the biggest decline since disclosing that segment in 2017. It’s the first time since the second quarter of 2019 for Amazon to make any reference to Whole Foods’ growth, when it said sales grew around 5% year-over-year on an adjusted basis.

Amazon physical stores sales q2 2020

Amazon’s physical-stores sales saw the biggest decline since disclosing the segment in 2017. The results exclude sales from online deliveries and in-store pickups.

BI Intelligence

The disclosure also shows Whole Foods is likely generating a larger portion of its sales from online deliveries and pickups amid the COVID-19 crisis. Assuming almost all of its physical stores sales came from Whole Foods, Amazon needs to have generated at least $556 million from online orders last quarter just to break even in growth. Last month, Amazon’s CFO Brian Olsavsky said Amazon’s online grocery sales “tripled” from the year-ago period.

Whole Foods’ increased demand from online shoppers during the pandemic is in line with the broader trend other retailers are seeing. Walmart’s US e-commerce sales nearly doubled in the second quarter, while Target’s digital sales roughly tripled during the same period. Both Lowe’s and Home Depot saw their online sales more than double in their most recent quarters, as more people spent on home improvement products. On Tuesday, Best Buy said its US online sales more than tripled last quarter.

“Amazon’s DNA is online, so Amazon will naturally focus and succeed in driving online solutions [for Whole Foods],” Andrew Murphy, managing partner at Loup Ventures, told Business Insider.

‘Ho hum’

Whole Foods’ in-store shopping business, however, has more room to grow, Murphy said. The shopping experience at Whole Foods seems to have “deteriorated” since the Amazon acquisition, and the merger between the two retailers has mostly “felt bolt-on, and not truly integrated,” according to Murphy.

Other shoppers may be feeling the same way about Whole Foods. According to location data provided by Cuebiq, foot traffic to Whole Foods dropped by almost 50% since April — a much steeper cut than what other retailers, like Walmart and Target, have seen. 

The in-store traffic decrease may be due to Whole Foods turning a handful of its stores into “dark stores” that only handle online orders because of COVID-19. It also temporarily adjusted store hours in certain locations.

But it’s still a huge disappointment, especially when others like Target and Albertsons said they saw an increase in in-store sales during the pandemic, according to Sucharita Kodali, an analyst at Forrester Research. She said it’s hard to see how exactly Amazon has improved Whole Foods’ in-store business, and that the reduced foot traffic may be a testament to the grocer failing to make its physical stores more appealing to general shoppers.

“The synergies with Amazon have been ho hum,” Kodali told Business Insider. “These numbers are nothing to be proud of.”

Some Amazon employees appear to be frustrated by the slow pace of growth at Whole Foods, too. At an internal staff meeting held last year, an employee asked then-physical-stores boss Steve Kessel about the company’s plan for “launching the future of retail” across Whole Foods and the grocery business in general, as Business Insider previously reported.

Kessel, who left the company earlier this year, said most innovations take place over a long period of time. He likened Amazon’s progress in physical stores to its shipping service, which took nearly two decades to get to the current one-day shipping standard.

“Innovations happen by continued focus on smaller innovations over time,” Kessel said. “I think as we continue that and look back over the years, it’ll start to look like the future of retail — but that’ll take some time.”

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