Amazon is buying Whole Foods for $13.7 billion
- Author: Arturo Norris Jun 22, 2017,
Jun 22, 2017, 19:42
"The retail sector is used to change, but every so often an event occurs that shakes the industry to its core", said Neil Saunders, managing director of research firm GlobalData Retail.
Some customers said they believe Whole Foods shoppers will quickly adapt if Amazon does widen the online grocery shopping experience.
The acquisition stands as a huge boost for Amazon's strategy to integrate the brick-and-mortar model into its business.
Grocery stores, which have low profit margins, have also been competing more intensely when it comes to price, especially of organic and natural foods. It also had been facing increased pressure from rivals, including European grocery chain Lidl, which is planning to enter the East Coast market, along with Aldi and Trader Joe's. Whole Foods itself had launched an offshoot chain named after its "365" private label brand in a nod to the popularity of no-frills chains.
A Moody's analyst described the Amazon-Whole Foods deal as a "transformative transaction, not just for food retail, but for retail in general".
Fresh foods are the final frontier for Amazon.
When Amazon approached, Whole Foods turned again to Evercore. Standard and Poor's (S&P) immediately put Amazon.com's credit rating on alert noting that the company would likely have to turn to debt markets to fund the deal. Whole Foods was, however, costlier in 1992 as compared to today (keep the times in check) and it has been reducing the prices to keep the sales in check.
"Amazon can now answer the question, What are we having for dinner", he says.
Several retailers have also been experimenting with ways to get people to buy groceries online, a habit that still hasn't fully taken off. Walmart, for instance, is trying to take advantage of its brick-and-mortar footprint through a service where people can buy groceries online and pick them up in the store. This will allow Whole Foods to do what it does but better and more profitable.
Amazon has already made inroads into tackling the grocery market in the USA and UK. He says he's excited to try out whatever they offer.
Amazon which is now the world's largest retailer by a great distance surpassing the Wal-Mart in terms of valuation by more than 100% has announced its intentions to buy Whole Foods.
But home delivery of goods has proven to be a big hurdle due to costs and the difficulty of selling meats and other perishables. What's more, Amazon recently filed a patent for tech that monitors, redirects and even blocks searches for competitors' products while connected to their store WiFi.