Amazon is once again shaking up the retail sector, with the announcement Friday it will acquire upscale USA grocer Whole Foods Market, known for its pricey organic options, in a deal that underscores the online giant's growing influence in the economy.
Amazon's deal with Whole Foods makes it a strong competitor for Wal-Mart, not to mention the leading grocery stores. Some analysts estimate that Wal-Mart commands a almost 21% market share in the $800 billion US grocery market.
"This will be a good deal for consumers, including those who might not have been doing business with Whole Foods in the past, either because of its positioning in the organic branding space or because prices have been seen as high", Hamrick said. The upscale grocery chain recently replaced much of its board, added a new CFO and developed plans to slash costs and tweak operations.
Whole Foods just removed its Apple Watch app from the App Store, making it the latest company to do so after Google, eBay, Amazon and others did the same earlier this year.
"Although industry revenue is only set to rise at an annualized rate of 0.8% over the five years to 2022, the transaction will allow the online retail giant to boost not only its grocery sales, but expand its brick-and-mortar presence", IBISWorld Industry Analyst Madeline Hurley said in a statement emailed to press. I never would have thought that the retailer in question would be Amazon.
Any buyer of Whole Foods would likely argue that it was not in the same market, said Alden Abbott, an antitrust expert with the Heritage Foundation. A closer look at these deals reflects that Amazon is pushing ahead with its e-commerce business outside the US while putting more emphasis on the brick-and-mortar way in the U.S.
"We also expect Amazon to install its technology at Whole Foods locations", Kantar Retail Senior Analyst Robin Sherk told FierceRetail.
Amazon and Whole Foods revealed their merger on Friday.
Whole Foods has already been reducing prices to try to turn around its worst sales slump since going public in 1992.
Whole Foods CEO John Mackey will remain his position, and the deal is expected to close in the second half of this year.
Mackey, who has viewed Whole Foods as a "mission-driven" company aimed at improving American food, castigated Jana as an example of craven capitalism looking for a quick profit. We asked economist Roger Meiners to explain what Amazon gets out of it and why Whole Foods agreed to sell.
She conceded it might be tough to outbid Amazon, but it could still be worth it to drive up the price and make Amazon pay more. With this acquisition, the way we shop as a result of the internet could change; going in a store, scanning a pass (or being facially recognised), selecting goods, putting them in your bag and walking out, being charged via your amazon account is a game changer.
Amazon has been desperately trying to break into the grocery business for some time, but that's proven a hard nut for the online mega-company to crack. Between the high-end brand that Whole Foods brings to the table and Amazon's mastery of logistics, it may not be long before they both feel the pinch. As soon as the acquisition was announced, grocery retailer shares around the world were getting hammered on the stock market.
In addition to Wal-Mart, Short specifically mentions Kroger and Target as potential counterbidders.