What Whole Foods Could Mean for Amazon—And Payments

We were just wrapping up production of this issue when word came that Amazon.com Inc. had offered $13.7 billion to buy Whole Foods Market Inc. The deal, which is expected to close some time between now and the end of the year, will certainly embed e-commerce kingpin Amazon in the world of brick-and-mortar retailing. But for the payments business, the deal carries with it some special implications that deserve consideration. Let us just briefly look at one in particular.

Since the first of the year, Amazon has been experimenting with an app called Amazon Go at a grocery store it built in its home town, Seattle. With the app on your phone, you can walk into the store, grab whatever you want off the shelves, and walk out. Payments people have been talking for some time about using mobile technology and cloud-based credentials to dissolve the chokepoint in physical retail, otherwise known as the checkout. At this Seattle store, Amazon is doing it, admittedly with the help of some machine learning (that’s what figures out what you’ve put in your basket).

Now, imagine applying this idea to some or all of the 460 stores in the Whole Foods chain. Anyone with an Amazon account already has card credentials registered in what amounts to an Amazon wallet. If the store can identify you when you enter, as Amazon Go does through scanning a QR code generated by the app, it can tie you to your account. Then, when you leave with your goods, it can apply the purchase to your card, just as Uber does when you step out of the car.

That will be hard to compete with, given that so few grocery chains have developed a proprietary mobile-payments app.

Now, it happens that Amazon has also been running some bookstores in a few places around the country. One thing it has learned from these stores, it seems, is that the proper place for mobile phones is not at the backend, at checkout, but at the front end, where people can use them to get book reviews and other product information.

Patrick Gauthier, vice president of Amazon’s Pay With Amazon unit, told me a few months ago that, while 50% of customers use mobile phones while shopping inside the stores, by the time they get to the checkout only between 2% and 4% still have the phone out to pay.

Sounds like a tailor-made case for what Amazon Go is all about. And for what Whole Foods stores may be all about in, maybe, a year or two.