Goldman Sachs Group Inc advised Amazon on the deal and provided bridge financing.
A former grocery expert at Amazon predicted that the chain, nicknamed "Whole Paycheck", would add a selection of discounted food and build out non-grocery areas within stores, particularly for pharmacy and Amazon devices.
Amazon has been accused of destroying portions of the entire brick-and-mortar retail economy.
In Whole Foods, Amazon is acquiring a company that has recently come under pressure from investors for its lagging performance.
Amazon.com Inc said late Friday it would buy Whole Foods Market Inc for $13.7 billion, in an embrace of brick-and-mortar stores that could turn the high-end grocer into a mass-market merchant and upend the already struggling US retail industry.
With the acquisition of Whole Foods, Amazon should be able to more easily deliver groceries to members - especially in locations where Amazon has yet to establish a strong enough presence. With the deal, Whole Foods' more than 460 stores become a test bed with which Amazon can learn how to compete with Wal-Mart's 4,700 stores with a large grocery offering that are also within 10 miles (16 km) of 90 percent of the USA population.
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.
The biggest player in the fragmented market is Wal-Mart with 14.5 percent, with Kroger second with 7.2 percent.
The stakes are highest for Wal-Mart. The online giant a year ago declared its plans to open a physical grocery store called Amazon Go, a market without cashiers where consumers would be automatically charged based on the items they placed into their shopping bags. 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.
That said, there is some speculation that Amazon could end up changing its plans and ultimately use advanced technology inside Whole Foods stores. It also is testing same-day fresh and frozen home delivery from 10 of its stores.
Whole Foods CEO said, "This partnership presents an opportunity to maximize value for Whole Foods Market's shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers".
"This private corporation already dominates every corner of online commerce, and uses its power to set terms and prices for numerous most important products Americans buy or sell to one another", Lynn said.
Now that Amazon is in the brick-and-mortar business selling books and groceries, who knows where it will set its sights next? Gartner retail analyst Robert Hetu said Amazon could bring pieces of that to Whole Foods to further cut costs.
It is unclear how Amazon will use Whole Foods, as the company would not go into detail about its plans.
"Amazon will reduce prices and change the assortment of products carried in Whole Foods stores to attract a larger customer base", said Ladd.