25 June, 2017
This May 3, 2017, photo, shows a Whole Foods Market grocery store, in Upper Saint Clair, Pa. Experts say Amazon's blockbuster deal to buy the Whole Foods supermarket chain poses a threat to Canada's grocers and could force them to lower prices, enhance technology or boost their e-commerce services.Amazon announced Friday it plans to acquire Whole Foods Market in a US$13.7-billion agreement.
Major stock indexes eked out tiny gains after spending much of the day in the red, but grocery stores and retailers plunged on concern about new competition as Amazon said it would buy Whole Foods.
"The conventional grocery store should feel threatened and incapable of responding", Wedbush Securities analyst Michael Pachter said.
The deal could be "transformative", Moody's lead retail analyst Charlie O'Shea said, "not just for food retail, but for retail in general".
"It's going to send a shock wave across the board, and this represents the true utmost in market disruption", said Burns McKinney, chief investment officer with the Dallas investment team for Allianz Global Investors.
"My guess is that the play here is going to be the home delivery that's going to be accelerated by Amazon, not only groceries but prepared meals as well", Mahaney said.
We don't yet know whether CEO Jeff Bezos will turn every Whole Foods into one of those creepy Amazon stores with no people.
CNBC noted: "Whole Foods would be required to pay Amazon a $400 million breakup fee if the deal is broken for another bidder". And the company has launched an offshoot chain named after its "365" private label brand, a nod to the popularity of no-frills chains that draw shoppers with low prices.
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.
"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. Amazon's stock was up 3.6 percent. It had previously announced plans to open a 1,800-square-foot store called Amazon Go in Seattle, Washington. And shoppers may be skittish about having Amazon take over one more element of their shopping experience. And it should be able to bring cost-cutting technologies, such as robots to move inventory around, while the company gets a better picture of customers by marrying data from Amazon and Whole Foods' loyalty programs.
In the short-term, said von Massow, it's unlikely Amazon will steal customers from other Canadian grocers. It has more than 400 stores in south of the border. Amazon also offers grocery shipments elsewhere, but that's tough with perishable foods. The important thing for Amazon, though, is that it is closer than ever to its customers, offering things they need to buy almost every day, making it more convenient than ever.
Canadians have few options for grocery delivery with a small number of companies like Grocery Gateway and a few large chains offering the service in limited locations.
