Amazon buying Whole Foods in bold move into brick and mortar


Amazon is adding to its retail empire by buying the Whole Foods grocery chain for $13.7 billion.

The deal rattled the retail sector.

Experts say Amazon's blockbuster deal to buy the Whole Foods supermarket chain poses a threat to Canada's grocers and could force them to lower prices, enhance technology or boost their e-commerce services.

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"What I think we will see - for sure - is some sort of innovation in the industry in response to a new competitor who's committed to coming in".

Walmart, which has the largest share of the USA food market, has already been pushing harder into e-commerce to build on strength in its stores and groceries. "In general, it's not as big as people say it is".

Online juggernaut Amazon said it pay $42 a share for Whole Foods. Its biggest to date had been the $1.2 billion acquisition of online shoe retailer Zappos in 2009. It already runs AmazonFresh, a grocery delivery service that costs $14.99 a month for members of its Prime service, and it recently opened a few grocery stores. The company will apply that model to the Whole Foods system, said Cooper Smith, head of Amazon research at L2, a consulting company.

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The grocer has struggled with same-store sales in recent years, pulling down its stock, so Amazon's proposal provides a way out for shareholders.

"I do believe that end is in the very near future", he said. But everybody buys food at least once a week. The app would then have automatically charged whatever products they took out of the store with them to their Amazon account.

With just its online focus, Amazon is already a major player in the active lifestyle space. Hundreds of US Walmarts offer a "click and collect" service. The store uses sensors to track items as shoppers put them into baskets or return them to the shelf. It's designed to create loyal Walmart consumers, both offline and online.

Marc Perrone, head of the United Food and Commercial Workers International Union, which represents millions of grocery workers, said that Amazon's "brutal vision for retail is one where automation replaces good jobs". But Whole Foods came under pressure to find a buyer this year after activist investor Jana Partners acquired a more than 8pc stake and began pushing for a buyout.

Shoppers will also benefit from the deal in the form of lower prices, Hughes predicts, as the two entities combined will provide a scale Whole Food never achieved on its own. "Barclays analysts said they raised their price target to $48, but they saw an upside price for Whole Foods of as much as $57 per share".

Last week, at the ATMOsphere America 2017 conference in San Diego, Calif., Accelerate America magazine presented Whole Foods with a best-in-sector award in the food retail category for its myriad natural refrigerant pilots, including 10 stores with transcritical Carbon dioxide stores, one with ammonia/CO2 cascade and one with propane/CO2 cascade, as well as more than 50 stores with at least one propane self-contained case.