Whole Foods CEO calls deal with Amazon 'whirlwind courtship'

Investors are keeping a close eye on online juggernaut Amazon amid fears it will send retail stocks plunging
Whole Foods CEO calls deal with Amazon 'whirlwind courtship'

20 June, 2017

By targeting the audience most comfortable with online grocery shopping - which might be willing to pay a little extra for time-saving delivery - Amazon may be poised to become a dominant force in food retailing.

"The conventional grocery store should feel threatened and incapable of responding", Wedbush Securities analyst Michael Pachter said. "This is not - this is not a Tinder relationship".

While the rise of e-commerce sites has already been hurting traditional retailers, Costco may have been relatively insulated from online pressures due to its subscription model, according to Trussell. And it's trying Amazon Go, an experimental Seattle store with no check-out required. But would Jana say no to a higher offer from Walmart or another Amazon rival?

Giammona says there is some concern among "hard-core Whole Foods fans" that Amazon could change the grocery's image and product options.

Not only is Whole Foods the online retailer the biggest transaction to date, it provides a massive statement of intent.

"Amazon's acquisition of Whole Foods solves that issue".

Groceries are already a fiercely competitive business, with low-priced rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first US stores just this week. And in a nod to the popularity of delivery companies like Blue Apron, Kroger and Whole Foods have been testing meal kits as well.

After the $13.7 billion deal was announced Friday, some critics said it would give Amazon an outsize presence in too many pockets of the US economy.

Cowen's research indicates 64 percent of Costco members were also Amazon Prime members as of May, the investment firm said.

Mackey said there will be cost-cutting in Whole Foods' future. Shoppers skip the checkout line, and their Amazon accounts get automatically charged. Kroger has almost 2,800 stores that operate under a variety of names. "It is likely that Amazon will utilize Whole Foods to even further expand their private label offering".

"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.

Parikh added that Amazon's offer appears to be "undervaluing the company's prospects and the powerful brand" and that Whole Foods could do better. Hetu said Amazon could make pertinent offers to attract shoppers of one but not the other, or get shoppers of both to buy more.

"Whole Foods Market has been satisfying, delighting and nourishing customers for almost four decades - they're doing an fantastic job and we want that to continue".

Texas native John Mackey, who co-founded Whole Foods in 1978, will continue to serve as CEO. This year appears to be a tipping point, as the share of Millennials saying they buy groceries online at least occasionally has surged to 43 percent, up from 28 percent in 2016, according to the Food Marketing Institute, an industry group based in Arlington, Va.

"We're gonna evolve. So I can't say there's not gonna ever be any changes", he said.

"It would be easier to just order everything and have it all delivered. But I prefer to do it myself", said Melloy. Still, it's the kind of technology that could help cut costs down the road, and that others may look to as well.

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