Case Study Analysis

Amazon is planning to bring a biometric payment method to Whole Foods

Report By:
Krishangi Deka UIN: 664357494
Abirami Vadivel UIN:652786640
Kajol Shaikh UIN:674282235
Tejali Valkunde UIN: 659152548
Dhruv Dhami UIN:665626746
Samar Sengar UIN:660272397

Course Name: Marketing (MKTG500)

Professor’s Name: Eliane Karsaklian
March’28, 2020
Table of Contents:

Summary of the article.......................................................................................................................................................3

Competitive advantage to Amazon....................................................................................................................................3
Risks associated with rolling the biometric payment technology....................................................................................4
What impact will the decision of rolling out biometric payment system have on Whole Foods’ image?.....................5
Will this measure enlarge or restrict Whole Food’s target market? Explain.................................................................6
Appendix:............................................................................................................................................................................. 8
References:........................................................................................................................................................................... 8
Summary of the article

Amazon is expanding its in-store retail business in the grocery market by the purchase of Whole Foods which
represents around 2.5% of the US grocery market. As of August 2019, Amazon’s Whole Foods has been
positioned No.9 in the in-store retail market compared to Walmart (No. 1 with 29%) and Kroger (No.2 with
9%) in the in-store grocery market. Amazon is experimenting with biometric payment option in the grocery
industry which will mark its first step into in-store payments technology. The retail giant is currently testing
internally within New York offices, a hand-scanner payment system which is code-named as “Orville”, using
which a customer can pay by merely waving at a scanner. The scanner uses computer vision and depth
geometry and doesn't require consumers to physically touch it. If the internal testing is successful then Amazon
is planning to launch Orville at few of the Whole Foods stores before bringing it to all the US locations.
Amazon is not the first one to attempt to roll out a biometrics payment in the retail industry, it has been
successful initially but then slowly drained off. The real question is Can Amazon make it work?

Amazon is said to be working with Visa for testing the terminals. They are also said to be in talks with card
issuer Mastercard as well as JP Morgan Chase and Well Fargo. Various reports indicate that Orville will allow
consumers to link their card data/Amazon Pay mobile wallet to their palm print alongside payment terminals
that will be able to scan that palm print and allow them to make purchases without ever having to pull out a card
or phone. Pay by Touch is the first one to introduce the concept of payments by fingerprints back in 2005,
which failed due to lack of funding and market conditions back then.

Amazon dominates the online grocery sales (Figure 1). “Online sales represented just 5.5% of U.S. grocery
sales in 2018”, Brick Meets Click says. In the vastly larger world of store-based sales, Walmart Inc. is the clear
leader. The expansion of Amazon’s store presence is a solid indication that Amazon now wants to be an
omnichannel retailer to challenge traditional retailers in the physical world since it believes that consumers
purchase groceries and food more than anything else and if they can establish a leadership position in groceries
—even though it is a low-margin business—Amazon will attract more customers to buy its higher margin
products sold online or offline. Thus, Amazon is interested in the in-store grocery market.

With this biometric payment technology, Amazon will surely have a first mover advantage in the retail payment
industry. Amazon is known for building its business by having a competitive advantage with its technology and
innovation. Amazon does not seem to change the way customers pay when shopping with them i.e. at Amazon
Go stores or Whole Foods but the goal is bringing palm as the payment mode to any place the customer happens
to transact. Amazon will surely have a competitive advantage with this new technology in the payment industry
and we think it may have an advantage in the retail world due to its technology based competitive strategy
which has been further analyzed in the study for conclusion.

Competitive advantage to Amazon

Porter’s 3 forces which is designed to analyze the competitive advantage, is being used as follows:
1. Benefits:
 Solution to Theft: In 2018, $24.26B was lost due to worldwide credit card payment fraud in which
retailers incurred $580.5M in debit card fraud losses and spend $6.47B each year on debit and credit
card fraud prevention. Biometric payment system will be a solution to the theft issue. The purpose of
this payment system will be to replace card swipe and pin system with a scanner since the card or card
 details can be stolen and pin can be guessed, but biometric scanners will not store our card details into
the terminal. The details will instead be replaced with a unique identifier for each customer.

Moreover, Amazon’s hand biometric payment system doesn’t actually require the customer to place
their hand against a scanner. They can simply wave their hand over it and the scanner will use
computer vision and depth geometry to identify the customer and charge their purchase to their card
on file.

 Accuracy: The technology is reportedly accurate to one ten-thousandth of 1 percent. Amazon engineers
are scrambling to improve it to a millionth of 1 percent.

2. Target Market: You can create demand, the driver of all economic growths, due to following benefits with
respect to customers and merchants:
 Accelerated transactions: Orville will take 300 milliseconds to complete a transaction while other
options like NFC or card payments takes around 3 seconds, making payments fast and easier thereby
reducing check-out lines and improving customer experience.

 Augment customer convenience: Customers will not have to carry cards or mobile phones to shop,
therefore increasing convenience while shopping.

 Merchants: Due to improved customer experience and convenience, there will be increase in sales
thereby benefitting the merchants. Also, there is much lower cost to the merchant making the sale, as the
cost of biometric purchases will often be lower than the cost of regular ones made using credit cards or
debit cards.

3. Competitors: How will this technology give an upper hand to Amazon over its competitors:
 Revenue generation: Amazon will have a technology advantage over its competitors like Walmart,
Kroger and other medium scale stores. Looking at the current trend of fingerprint, face recognition and
other biometric methods people are using to access their smartphone, it can be interpreted that customers
are ready for biometric payment. The technology would give Amazon more information about their
consumers’ spending habits which would give Amazon more leverage to charge high prices to the
advertisers or merchants based on the idea that they can better predict what customers are likely to buy.
Also, they could use this data to have a foothold in the in-store grocery market where Amazon could use
the data and build strategies around to attract customers in their stores.

Moreover, statistics from comparison of online and retail sales of Amazon have proved that consumers
tend to spend more when they do not utilize something tangible like money. So, this could turn out to be
more lucrative for the company (Amazon).

 Higher reliability (compared to other biometric technologies): Based on empirical observations,

hand scanning has a higher level of public acceptance than many other biometric technologies.

Risks associated with rolling the biometric payment technology

“Customers value is a vital weapon against churn. There is no better product development team than the
customers” Kate Thunnissen of Trint says. When it is any payment mode, customers are very skeptical to adopt
it at first due to security concerns. Statistics show that 15% of adults are comfortable with biometric payments,
a quarter of which are 18 to 24 year olds, however 61% feel that providing companies with fingerprint puts their
personal identity at risk. Also, it is possible that human body undergoes temporary or physical changes, then it
is important for Amazon’s Orville to take care of this issue so that the stored biometric information aligns with
the change. Thus, the biggest challenge for Amazon will be to explain customers the procedure behind the
technology explicitly to eliminate their doubts since they do not store fingerprints into the system as opposed to
scanner used at the government security departments, for example. Reassurance will be the key to ensure the
success of this technology. Following are the issues which could be incurred with rolling of biometric
payments:
 Data Privacy
Increased concerns on data privacy will definitely make consumers hesitant towards the biometric mode
of payment. As most of the other utilities such as mobile phones, house door vehicle operations are
linked to the biometric information (Finger print). Biometric data is vulnerable as it can be altered from
a single point of interaction. Biometric system can be exposed to fraud during the sign-up process as
well as the data storage.

 Inaccuracy
As compared to the accuracy and reliability of the current payment systems, there can be seen some
discrepancies with the biometric payment systems. In biometric identification & authorization there
would be a variation between enrollment and the acquisition considering bodily changes, there would
never be a perfect match for such biometrics indicators.

 Legal issue
Currently, national laws aren’t prepared even remotely to handle the biometrics authentication and
authorization. Neither global standards nor clear legal status is available for such payment methods.
Amazon needs to be mindful of the landscape and the patchwork of state laws that govern biometric data
privacy.

 Uncomfortable for customers

As this will link their purchases uniquely to the customers, also authorization of debit/credit cards
through biometrics, many customers might not be comfortable for this move. It might be unsettling with
the customer base of both whole foods and amazon respectively. Failure of biometric systems by
amazon would negatively impact the whole foods brand name.

If the system is rolled out in the Whole Foods stores and if during the testing phase, customers experienced any
problems then it can lead to negative word of mouth, thereby hampering the business of Amazon in the grocery
retail industry. Also, it seems that for customers in the short term, the biometric system will be appealing and
hence, would come to the stores for shopping but what about long term? For this, Amazon will have to
strategize tactfully by understanding the shopping experiences of its customers and like they do in their online
marketplace, use some personal gratification or customer loyalty programs, etc. to increase the customer base.
All this would work only if the technology is perfected.

What impact will the decision of rolling out biometric payment system have on Whole
Foods’ image?

To answer this question, we will use SWOT Analysis:

Strength:
From the above-mentioned points, we can see that if the technology is accurate and solves all the security
concerns then it will be of great advantage to Amazon and Whole Foods.
 The scanner will attract a lot of customers because it is the first ever biometric payment system, it is
convenient and hence in-turn would encourage customers to spend more when they visit Whole Foods.
“People tend to spend more when they don’t have the experience of touching something tangible like
 money,” Maksad said. “The utility of money becomes more ephemeral.” This will thus increase the
sales.
 Due to the scanner, Amazon will be able to study the customer patterns and develop a strategy around it
for increase in sales of Whole Foods just like they did with the concept of Prime and discounts after the
acquisition.
 Amazon plans to implement biometrics by linking it to Amazon Pay. This inherits a very large customer
base for Whole Foods with all the payment details already with them. Therefore, reducing set up time
and costs.

Weakness:
 Research suggests that only 15% adults of the age 18-24 will be comfortable in using this technology in
the long run whereas 61% will still be uncomfortable to use it. Hence, it is difficult to conclude that this
technology will have any significant impact in the sales of Whole Foods. Because Amazon Go is also
ahead in terms of technology but still it could not make its mark in the grocery business. Also, if there is
a problem encountered in the payment via scanner then it will lead to negative word of mouth thereby
impacting the image of Whole Foods. So, we feel that the scanner will definitely give a first mover
advantage to Amazon but how well or profitable will it be for Whole Foods is questionable.
Opportunities:
 Customer convenience increases because of Orville since there is no cash, card or mobile payment
involved and research shows that customer tends to spend more in such cases. Hence, Orville gives an
opportunity to Whole Foods to attract new customers and increase its market share.
 Using Orville, they will get customer’s shopping/buying patterns, analyzing which Amazon and Whole
Foods are provided with an opportunity to practice differentiated pricing strategy which will enable
them to maintain its loyal customers with great service and lure new customers through other value-
oriented propositions. When the technology is perfected and Orville captures other retail stores then
customer data can be of huge advantage in building Whole Foods strategy.
Threats:
 The changing regulatory framework and introduction of new stricter regulations impose a major threat to
the Amazon’s Whole Foods. It makes compliance with legal standards more complex and challenging
for the business organization. Inability to comply with changed regulations raises the risk of expensive
law suits. Currently national laws aren’t prepared even remotely to handle the biometrics authentication
and authorization. Neither global standards nor clear legal status is available for such payment methods.
Amazon needs to be mindful of the landscape and the patchwork of state laws that govern biometric data
privacy
 Orville is new as a biometric technology in the market which means it is prone to bad publicity if the
technology is not perfected. Bad publicity will affect Whole Foods business.
Thus, we cannot conclude that this biometric payment system will have a huge positive impact on Whole Foods
image because all its competitors have a competitive advantage of location over Whole Foods. However,
Orville will help collect data on customers’ shopping patterns and help improve their experience by changes in
strategies thereby improving Whole Foods image.

Will this measure enlarge or restrict Whole Food’s target market? Explain

Whole Foods Market Inc. is one of the grocery chains selling all organic food and health products without
harmful preservatives and additives which are not healthy for consumption. It is the nation’s largest retailer of
organic foods, 5th largest public food retailer, and the 10th largest retailer overall based on 2014 sales rankings.
Whole Foods Market is one of the pioneer sellers of natural and organic food in the grocery industry. They are
first ones to be certified as national “Certified Organic” grocer. Some of the company’s core values are:
 selling the highest quality natural and organic products,
 support team member excellence,
 create wealth through profits and growth,
 serve and support local and global communities.
Let’s look at target market and positioning of whole foods before answering the question.
Target market:
The target market of Whole Foods is basically customer with above average national salary, health conscious,
and lead a healthy lifestyle. These customers usually have a college degree and do not want any discounts or
deal. They will usually be buying high end items at whole foods. Whole food is currently targeting new group
of customers that is millennials. This target group generally consists of newly graduates with more liberal and
progressive values. Whole food is opening new set of stores for this new target group.
Positioning:
Whole Foods Market places itself among its rivals as the best source of healthiest, most natural
and sustainable food and is the first grocery store in America to be "Certified Sustainable." It hasofficially accre
dited all its stores and operationsand is the only food retailer to date to have its
store departments accredited at all locations.
Whole Foods differentiates itself from its rivals by depending on the highquality standards it has set. This is als
o certified by California Certified Organic Farmers ("CCOF"), a third-party independent, USDA-accredited cert
ifier CCOF’s Organic Certification Program verifies Whole Foods handles organic goods according to stringent
USDA guidelines.
One of Whole Foods' main marketing tactics is its supply chain. It procures its goods from local and globalsuppl
iers and ensures the production of its goods without breaching any labor rules, human rights or animal rights.
Verdict:
So looking at companies targeting and positioning we see the main target customer in case of whole foods is an
educated and rich citizen and millennial who is more concerned about time rather than the money, this new
technology is going to save them time as it is much easier and faster than regular card transaction and they will
not have to spend their time in massive lines. So basically, it is going to attract more customers who don’t want
to waste their time in the line instead spending extra time buying things. But at the same time there would be
many customers who would not be comfortable giving their biometric data in the fear of data being theft or
misused so for them they can still use the existing card payment method. So, this measure in no way going to
restrict the target market.
Hence, this measure combined with Amazon’s Prime and discount pricing strategy can be helpful in enlarging
their target market segment and give competitive advantage over other brands.
Appendix:

Figure 1

References:

http://panmore.com/whole-foods-market-marketing-mix-4ps-analysis
https://nypost.com/2019/09/03/amazon-testing-payment-system-that-uses-hands-as-id/
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biometric-data
https://www.businesswire.com/news/home/20180731005457/en/Security-Fears-Threaten-Biometric-Payments-
Growth-Reveals
https://www.pymnts.com/aml/2019/biometric-authentication-security-risk/
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