The Amazon.com Inc. (NASDAQ: AMZN) buyout of Whole Foods is a challenge to Walmart Inc.’s (NYSE: WMT) huge grocery business and to standalone grocery companies like Kroger. Amazon ratcheted up its competitive tactics with a program that will offer some of its Prime members 5% back on Whole Foods purchases.
The deal is limited to Prime members who use its Visa rewards card. Amazon does not say how many people this is. However, Prime members are much more likely to use Amazon for e-commerce than people who are not members. Amazon likely is counting on buying volume to fuel its Whole Foods program. Amazon’s Prime service offers streaming media and discounts on shipping. The Whole Foods deal may be a new way to increase loyalty to the program.
Amazon management wrote:
Amazon.com, Inc., Chase, and Whole Foods Market today announced that Amazon Rewards Visa Cardmembers can now enjoy even more rewards when shopping at Whole Foods Market on everything from animal welfare-rated meat to sustainably caught wild and responsibly farmed seafood to a vast selection of local, Whole Trade® and organic produce. Starting today, eligible Prime members will earn 5% Back on Whole Foods Market purchases when using the Amazon Prime Rewards Visa Card, in addition to the rewards they already receive everywhere else they shop, including 5% Back on all Amazon.com purchases, 2% Back at restaurants, gas stations and drugstores, and 1% Back on all other purchases.
JPMorgan is Amazon’s credit card partner.
Walmart has a credit card program of its own. Customers who use the card save 3% on purchases at Walmart.com and 1% on items bought at Walmart locations. However, it does not have a program that targets Walmart grocery shoppers.
The Amazon plan will help it to challenge Walmart, which has many more grocery locations. Whole Foods has 477 stores in the United States and United Kingdom. Most of Walmart’s 5,142 U.S. locations carry groceries, particularly it 3,552 supercenters. Walmart also has over 1,000 places people can pick up groceries they order online.
Walmart still has the dominant national grocery business. Amazon has added one tool to its arsenal to help it catch up.