Amazon’s acquisition of Whole Foods has sparked a fight for the future of grocery shopping.  The Food Marketing Institute (FMI) and Nielsen have projected that US consumer spend on online grocery shopping could reach $100 billion by 2025.  While there have been many reports of Amazon’s early lead in the grocery eCommerce fight, the game is also changing.  While past growth in eCommerce grocery was dominated by small basket sizes in the snacking and coffee categories (lead by large packs, hard to find flavors and good deals), the future will centered around the Full Basket – that is replacing a consumers weekly trip to the grocery store.  As we have written previously, Amazon is not the easy winner in this fight.  Ever since the Whole Foods acquisition last summer, speculation has been ripe about how Amazon will leverage Whole Foods physical presence in this fight.  And Amazons near future plans are starting to come into focus.  Last week, Amazon announced a trial program in four US cities to deliver groceries and other goods directly from Whole Foods under the Prime Now service, with plans to expand the program to more markets over the course of 2018.

But is this Amazon’s end game for Whole Foods or is it just the beginning?  Is Amazon’s strategy with Wor hole Foods to be a Retailer or for Whole Foods to be the first scaled customer on Prime Now?  When the acquisition was announced last June, Ben Thompson of Stratechery had an alternate take: Amazon’s New Customer.  Ben argued that Amazon was buying its first customer for the platform it was building out.  The platform consisted of technology and logistics and was repeating the strategy behind Amazon Market Place and Amazon AWS.  If you haven’t read it yet, it’s a must read.  When we first read it, we had a few reasons to be skeptical.  Many still remain, but there are signs that Ben is on to something.

Looking at the offering in Austin, the Prime Now User Experience highlights how Whole Foods is one of the “stores” being offered.  In this market, a Sprouts Farmers Market is also available.  In other markets, you can find other high end grocery stores, liquor stores, pet specialty stores, and restaurants.  All these “stores” are leveraging Amazon’s technology and logistics platforms.

While some of these deals were done prior to the Whole Foods acquisition, others like Sprouts are expanding their partnership even after the acquisition.  Will other retailers use Amazon’s platform for the reach and revenue it can provide? Will they opt into other platforms like Instacart (who just raised $200M) or Shipt (recently acquired by Target) or will they develop their own solution?  Can Prime Now succeed as a platform with Whole Foods as its biggest customer or are retailers like Sprouts playing with fire?  What do you think?