27 June, 2017
Amazon's greatest retail nemesis, Walmart, has been bragging forever about how its vast infrastructure of brick-and-mortar stores and employees will give it a leg up on Amazon's still-fledgling network of stores.
On Friday, Amazon.com Inc countered.
Online retail giant Amazon is making a bold expansion into physical stores with a $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else.
The message is this: The brick-and-mortar retail business that pioneered organic, fresh food and the country's dominant e-commerce company makea powerful combination.
Just as Walmart is using Bonobos to get access to higher-end consumers and a more technologically savvy way of selling clothes, Amazon is using Whole Foods to get the expertise and physical presence it takes to sell fresh foods.
Whole Foods Market's share price rose more than 29% on Friday.
The stakes are highest for Wal-Mart.
Miller said, "The market's got this right" in terms of how it viewed the Amazon-Whole Foods deal.
The parties expect to close the deal during the second half of 2017.
Amazon has quietly built a booming business of in-house brands that produce things like batteries, baby wipes, and other household commodities.
Wal-Mart may be ready.
Online grocery sales are expected to increase from $71 billion this year to $177 billion in 2022, according to John Blackledge, an analyst at Cowen & Co. "We're potentially prompting a recession here", said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.
The deal unites the online juggernaut with the grocery store chain that fell behind as the organic and natural foods it helped popularize expanded to more locations and shoppers found "good enough" alternatives. It also is testing same-day fresh and frozen home delivery from 10 of its stores. "Most of us like to see what we're buying, and it's a good store, but we just wouldn't buy online", he said.
Peter Belanger of Newington, Connecticut, who was shopping at a Whole Foods in West Hartford, said he didn't think he'd be interested in groceries online.
"I think this acquisition is a concern", he said.
Amazon already offers grocery-delivery services in five markets, but the Whole Foods purchase would let it expand to many more.
Amazon said that it won't change the Whole Foods Market brand and stores will continue to operate under the same brand name.
Whole Foods, founded in 1978, has struggled to differentiate itself as competitors and has cited pressure from restaurant chains, meal-delivery companies and traditional supermarkets. Wal-Mart reported $6.9 billion in cash and equivalents and $20.9 billion in free cash flow at its year ended January 31.
Even so, the bigger picture here is that Amazon sees value in Whole Foods' real estate, which means Amazon is more likely interested in exploiting all of its locations to deliver all kinds of items more quickly to its customers. Based on his forecasts, Amazon will likely rank as the ninth largest USA grocery retailer this year - though he expects it to assume third place by 2021, behind only Walmart and Kroger. "We are seeing very early signs here across AMZN Bookstores and the Amazon Go store in Seattle", Anmuth wrote in a note obtained by CNBC.
Amazon is buying Whole Foods in a stunning move that gives it hundreds of stores across the USA - a brand-new laboratory for radical retail experiments that could revolutionize the way people buy groceries.
