28 June, 2017
In a convergence of online and traditional retailing, Amazon is buying Whole Foods Market, Inc., for $13.7 billion in cash.
Amazon.com Inc said on Friday it would buy USA organic supermarket chain Whole Foods Market Inc for US$13.7 billion, including debt, marking the internet retailer's largest deal and biggest foray into the brick-and-mortar retail sector.
And that quote came just before a jaw dropping announcement Friday morning: Amazon is buying Whole Foods and its 460 stores for $13.7 billion. The Seattle-based company already offers discounted Amazon Prime memberships for people receiving government assistance and is part of a pilot program to deliver groceries to food-stamp recipients. Merger mania has produced plenty of deals over the last few decades that haven't unlocked any value for corporate shareholders or strengthened the USA economy.
Some investors may be wondering whether Amazon could disrupt grocery stores the way it upended the bookstore business.
Similarly, Instacart was not privy to the news that Amazon was acquiring Whole Foods until the deal became public on Friday.
"They are on offense and that is a good position to be in", Binder said, referring to Wal-Mart. She also praised the way Shipt allows customers to schedule delivery times to make sure they'll be home when groceries arrive. Shoppers simply pick the items they want off the shelves and leave the store. But even if it surprisingly goes the full five years, the chances of a renewal seem extremely unlikely.
Senior retail analyst Walter Loeb wrote in a Forbes piece that while Whole Foods will continue to be operated by chief executive John Mackey out of Austin, he expects Amazon to "automate the whole operation, integrate it into its websites and lower prices". Expanding into the grocery market would not only bring profits to Amazon but a room for great expansion.
But mostly, online business gives shoppers choices, he said.
It is unclear how Amazon will use Whole Foods, as the company would not go into detail about its plans.
Technology news website Recode reported in April that Wal-Mart was in advanced talks to buy Bonobos and that the company generated $100 million to $150 million in annual revenue.
That, in turn, could help Amazon do better with pricing and promotions, branding and the overall store experience, said Robert Hetu, a retail analyst at Gartner. It's also been testing automation technology at a Seattle convenience store that's now open only to Amazon employees. The app would then have automatically charged whatever products they took out of the store with them to their Amazon account.
At first, consumers likely will see Whole Foods products in the AmazonFresh lineup, and just for Prime members. The transaction is expected to close during the second half of 2017.
Whole Foods, founded in 1978, has struggled to differentiate itself as competitors also now offer a plethora of fresh and organic foods.
Whole Foods had fiscal 2016 sales of about $16 billion. Mr Bezos is known for making unconventional decisions and having big ambitions, and this could mean a more frontal assault on Walmart - a face-off between the old and the new dominant forces in the retail world.
