27 June, 2017
Amazon and Whole Foods expect to close the deal during the second half of 2017.
Grocers have been trimming jobs through innovations like self-service checkout lanes.
Yesterday, Amazon stunned everyone when it revealed that it had agreed to buy out Whole Foods Market for a monstrous sum of close to $14 billion. It's as if the company got slapped with a stack of double coupons overnight.
The deal could be "transformative", Moody's lead retail analyst Charlie O'Shea said, "not just for food retail, but for retail in general".
"They are on offense and that is a good position to be in", said Jefferies analyst Dan Binder, referring to Wal-Mart.
Another analyst, Phil Lempert of Supermarketguru.com, said the deal is a blow to grocers across the country, both big and small.
Pachter said that if Amazon gets 20 million members of its Prime loyalty program to pay $15 a month extra for AmazonFresh grocery-delivery service, that's 20 million people not going to traditional supermarkets.
In addition to Newark, Whole Foods operates supermarkets in Montclair, West Orange, Paramus, Clark, Morristown, Madison, and other locations in the Garden State. The natural foods retailer helped start a trend toward natural and organic foods, but its stock has struggled in recent years and recently the company shook up its board and said it would cut costs. It's so successful that there are approximately 80 million Amazon Prime members in the USA alone.
"The conventional grocery store should feel threatened and incapable of responding", Pachter said. "In Columbus, The Andersons shut down, and that isn't Giant Eagle's best market".
Grocery stores are under more pressure to compete based on convenience, especially as more retailers and startups introduce food options such as meal kits, low-priced snacks and organic groceries, according to a report released earlier this year by Jones Lang LaSalle, a commercial real estate firm. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the United Kingdom could be turned into distribution hubs - not just for delivering groceries, but also as pickup centers for online orders. "Whole Foods was losing market share to Kroger", said Brittain Ladd, who until earlier this year was a senior manager working to roll out AmazonFresh globally.
Adrienne Anderson, at a Whole Foods in Savannah, Georgia, says she shops at Whole Foods nearly exclusively for meat and fresh produce "because of the quality and selection" and because fruits and vegetables are locally sourced. This deal gives Amazon a major foothold in that space.
Only about 2% of about $600 billion in annual grocery sales are made online, according to Daphne Carmeli, CEO of Deliv, which handles same-day delivery for more than 4,000 retailers, including grocers.
Completion of the transaction is subject to approval by Whole Foods Market's shareholders, regulatory approvals and other customary closing conditions. "It is like you have a Ford dealership and now you are selling Jaguars". Leave a comment and tell us your thoughts.
