With Whole Foods, Amazon acquires distribution network
- Author: Joanne Flowers Jun 24, 2017,
Jun 24, 2017, 21:22
Online grocery delivery can be notoriously hard, especially when it comes to the timely delivery of perishable goods, so here are five ways the purchase of Whole Foods will give Amazon an edge in this fight.
Amazon plans to keep the natural grocer's high standards, Whole Foods Chief Executive John Mackey said, adding, "They're not stupid enough to go change that". Mackey said mutual friends set the companies up on a "blind date" in Seattle about six weeks ago, and executives immediately hit it off.
"It was love at first sight", he says.
"It's been a whirlwind courtship".
It's also not clear if Amazon will sell the technology to other companies - for the sake of being able to profit off this vertical when the competition's already sealed off from its customers anyways. It's expected to be completed in the second half of the year.
Mr. Mackey likened Friday's deal announcement to an engagement, and "like an old traditional marriage, where there are all kinds of rules and chaperones, we can't consummate the marriage, until we're actually officially hooked up".
Amazon's $42-a-share offer amounted to a 27% premium above where Whole Foods' stock had closed the prior day, at $33.06. "Whole Foods itself has a lot of warehouses", RKF's Jeff Fishman said.
According to Bloomberg, Amazon plans to cut jobs at Whole Foods when it takes over. "I think that where Amazon may add the most value is to speed up the process of perfecting the 365 by Whole Foods model and scaling it quickly thanks to its greater resources".
"Whole Foods was late in realizing private label's opportunity because they were enjoying the growth of the organic market", said the Citigroup report "There is significant opportunity there for Amazon". I think we coulda talked for 10 hours.
Amazon has "had the courage.to resist the drumbeat of short-term, quarterly earnings that have had us trapped here for a couple of years, as our same-store sales came down", he said.
Going full throttle into groceries by announcing a $13.7 billion deal for Whole Foods on Friday, Amazon gets the advantage of using the stores as mini-distribution hubs to deliver items to customers. "Instead, what we may see is an increased use of technology in the supermarket to help us make our shopping decisions and also how we pay for things".
Short and others suggested other potential bidders include Kroger Co., the parent of the Ralphs and Food4Less supermarket chains; Albertsons, which also owns Vons and Pavilions; and retail giant And there's no shortage of speculation about the ways the company could innovate and leverage Whole Foods locations to further its interests.
And there's no shortage of speculation about the ways the company could innovate and leverage Whole Foods locations to further its interests.