With Whole Foods, Amazon on collision course with Wal-Mart

Inc just announced a deal to purchase Whole Foods Market Inc for US$13.7 billion, marking a move into the realm of brick-and-mortar stores that is already sending shockwaves through the economy.

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.

Acquiring Whole Foods will provide Amazon more physical locations to experiment with, and eventually expand its retail business.

According to a report by Washington Post, news of the deal sent shares of rival grocers plummeting, thanks to the prospect of an Amazon-backed grocery chain.

Amazon's shares rose 2.4 per cent to $987.71, adding $11 billion to its market capitalization, which in one sense makes the acquisition almost free for Amazon shareholders, AP points out.

"Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy", Amazon CEO Jeff Bezos said in a press release.

This suggests that Amazon will continue to buy and develop new areas of retailing for its customer base ... why not drug stores next?

"With the nationalization of its Prime-only delivery benefit, Amazon will be able to further incentivize its premium loyalty program, Amazon Prime, and bring more people into its ecosystem", Caporaso said. Kroger, one of the world's biggest supermarket chains, faced a $3 billion fall in market value.

Amazon declined comment on competition with Walmart but spokesman Drew Herdener said in a statement the company has no plans to cut jobs or use technology in development at its Seattle Amazon Go store to automate jobs of cashiers. While Amazon has been building more and more delivery hubs, the Whole Foods deal gives it 456 stores that it can instantly fit into that network, said Josh Olson, analyst with Edward Jones. Or someone who buys granola bars monthly from Whole Foods and paper towels every other week from Amazon might be offered the items in a single shipment, delivered to the door.

Whole Foods, founded in 1978, has struggled to differentiate itself as competitors and has cited pressure from restaurant chains, meal-delivery companies and traditional supermarkets. The deal on the surface seems valuable for stakeholders in both companies. On Wall Street, grocery stocks plunged on the news of the Whole Foods takeover deal. "It's a good company", she said. The agreement includes assumption of Whole Foods' net debt.

Convenience. More of our shopping visits are digitally enabled, and this is going to continue to grow. 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. Bank of America Corp also provided financing to Amazon, while Evercore Partners Inc advised Whole Foods.



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