“Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world”, Amazon said in a press release.
Amazon already offers grocery-delivery services in five markets, but the Whole Foods purchase would let it expand to many more.
The deal has the possibility to be “transformative”, Moody’s lead retail analyst Charlie O’Shea said in a note, “not just for food retail, but for retail in general”.
- Supervalu. The grocery store operator lost 54 cents, or 14.4 percent, to $3.22. The UK equivalent is certainly Waitrose, although that doesn’t really stack up to the contrast Whole Foods makes with, say, Walmart over there.
Amazon’s announcement of buying Whole Foods on Friday could eventually change the grocery industry. “Amazon has moved squarely onto the turf of traditional supermarkets and poses a much more significant threat”. Kroger sank 11.48 percent, while Costco dropped 5.64 percent.
Online delivery of groceries so far has been tough for any company to pull off because of customers’ concerns about the quality of meat and produce, Wedbush Securities analyst Michael Pachter said. Many said they had been told by managers not to speak to reporters. Amazon is also experimenting with a “click and collect” model that lets customers buy groceries online and pick them up at new AmazonFresh locations. But she would never buy food online, she said.
Amazon has previously offered food delivery through its Fresh service for over a decade but it has not made its mark in the grocery market.
The company, which had sales of almost $136 billion in 2016, accounted for 43 percent of online retail sales in the United States past year, according to Slice Intelligence, a San Mateo firm that analyzes e-commerce trends.
The move comes after activist investor Jana Partners took an 8% stake in Whole Foods in April and pushed the company to look into strategic options including a sale. Amazon brings a technology and distribution ability that no grocery retailer has. Earlier this week rumors were swelling that Amazon had its sights on acquiring messaging technology company Slack, turns out it was Whole Foods that would be first.
The all-cash transaction is valued at $13.7 billion, with Amazon assuming Whole Foods’ debt. That is the eighth Amazon bookstore now open around the USA and more are expected in the future. Pachter said Amazon might get customers over those fears if they know the delivered items are the same as those they would find at the local store.
With this strategy, Amazon is planning to make the prices competitive and attract “more low- and middle-income shoppers” to its retail stores, which may still be located in posh localities. Although Amazon’s plans for Whole Foods is not clear, the acquisition has some wondering what will happen to the chain’s existing stores.