Amazon deal for Whole Foods could bring retail experiments

While $12.5 billion of market value was added to Amazon in the hours following the deal, and $3 billion to Whole Foods, a net $39 billion was erased from the S&P 500 Consumer Staples Index.

For Whole Foods, the deal gets the company out from under the influence of hedge fund Jana Partners, whose attempts to win board seats and gain some measure of control over the company had grown acrimonious. Whole Foods could also become "Whole Foods by Amazon", or some other derivative.

"Everyone's writing about the impact the Whole Foods deal could have on the Target or Kroger types", Roswech said, "but really what is the impact this has on brands, which are in a position to be disintermediated from that retail position that's defined the past century or so for their products?" "Usually acquisitions are about financial extraction from a business, but this was a brilliant bypass around Jana, an activist investor". 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. It now delivers fresh food on demand and opening test stores in Seattle.

Online delivery of groceries so far has been tough for any company to pull off because of customers' concerns about the quality of meat and produce, Wedbush Securities analyst Michael Pachter said. 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.

Building permits, an indicator of upcoming construction, tumbled 4.9 percent nationwide to 1.17 million.

Walmart made news of its own Friday morning, announcing it was buying online clothing company Bonobos for $310 million.

Whole Foods will remain based in Austin and operate under its banner.

Whole Foods has endured a rough couple of years, dismissing about 1,500 workers in 2015 after posting a stretch of dismal earnings.

Amazon already offers grocery-delivery services in some cities but customers seem excited at the prospect that the Whole Foods deal will make food at your doorstep even easier. It could have built up its groceries business without acquisitions, said Neil Saunders, managing director of GlobalData Retail, but that would have been costly and time-consuming. Amazon is all about technology, and it's very likely that technology will be applied to the Whole Foods shopping experience.

Whole Foods will use "Amazon's superior inventory management, delivery management, better management of the customer database, and speed of service to checkout". In April, Wal-Mart announced a new policy offering discounts to shoppers who picked up items from a store, and the retailer clears that margin by saving on the cost of ecommerce fulfillment.

"It gives them a first step in Canada", said Michael von Massow, an associate professor at the University of Guelph, adding Amazon has shown it's committed to entering the food business.

"I'm excited to see maybe if they do some kind of thing with Prime now and Whole Foods, that would be interesting to me", Hiddeman said. Its stock peaked in 2013 at $65.24. And the key measure that retailers look at to gauge their health, revenue at stores open more than a year, has fallen for seven quarters in a row.

As Recode first reported previous year, Whole Foods has made an investment in Instacart, though it's believed to be a small one and does not involve a board seat.

Mackey helped grow the company from a tiny health-conscious grocer in Texas into a giant in upscale chain in all but eight U.S. states.

  • Zachary Reyes