25 June, 2017
It announced last Friday that it had agreed to buy online clothing company Bonobos for US$310 million.
The deal is the latest big move for Amazon and its charismatic chief executive Jeff Bezos, who grew Amazon from a small online bookseller in the 1990s into a global retail behemoth that delivers a wide range of goods and creates award-winning entertainment broadcasts.
Amazon's purchase of Whole Foods is a wakeup call for all grocery stores, says a Purdue University retail management expert."It is hard to overstate the impact that this is going to have in the grocery industry", says Richard Feinberg, professor of consumer science.
Whole Foods, a pioneer in organic products, as mentioned, started its business in 1978 in Austin, Texas, building its brand on healthy eating and fresh, local produce, though often with steep price points.
Grocery stores, which have low profit margins, have also been competing more intensely when it comes to price.
Some investors may be wondering whether Amazon could disrupt grocery stores the way it upended the bookstore business.
Hartmann said he expects the online retailer to introduce some efficiencies to Whole Foods' operation.
Amazon's bid for Whole Foods is due to be approved by the company's shareholders, regulatory approvals, and other closing conditions.
"Dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks", O'Shea said. And shoppers may be skittish about having Amazon take over one more element of their shopping experience.
Amazon already has made inroads into the supermarket business with its AmazonFresh grocery delivery service and a prototype checkout-free Amazon Go brick-and-mortar store, so far only open to employees. The deal on the surface seems valuable for stakeholders in both companies. This will help Whole Foods have an online delivery presence. In an email to customers, the company said it planned to maintain the same standards under Amazon, including bans on artificial flavors and colors. "That is the reality today at Amazon, and it will no doubt become the reality at Whole Foods", said UFCW President Marc Perrone in an email.
"This might be an opportunity for consumers who have felt that Whole Foods is inaccessible", said Lauren Beitelspacher, a marketing professor at Babson College in MA. The deal still has to get approved by shareholders and regulators. This year, Amazon is expected to the ninth largest retail grocery.
This deal will put it on the map of the $700 billion grocery market. However, Whole Foods does not have access to Instacart's financial numbers and analytics. It was recently granted a patent for technology that would block shoppers from comparing prices using their mobile devices while they are in stores.
After the announcement, Amazon's shares went up more than two percent and Whole Foods Market shares went up by about 28%.
But home delivery of goods has proven to be a big hurdle due to costs and the difficulty of selling meats and other perishables.
PCC has also partnered with its competitor, offering delivery through Amazon Prime Now since April past year.
