Amazon Buys Whole Foods – What are the Retail Implications?

Home News Amazon Buys Whole Foods – What are the Retail Implications?
Amazon Buys Whole Foods – What are the Retail Implications?

Online retail giant Amazon is set to takeover food market chain Whole Foods, dubbed as America’s healthiest grocery store. The deal, amounting to $3.7 billion, will be completed in the second half of 2017.

As part of the agreement in the takeover, Whole Foods will continue to operate under its current brand. John Mackey, its current CEO, will also remain in his position.

Amazon’s chief Jeff Bezos in a report said: “Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they are doing an amazing job and we want that to continue.”

Amazon Founder Jeff Bezos - Amazon Buys Whole Foods – What are the Implications?
Amazon founder Jeff Bezos. Credit: Steve Jurvetson

The planned takeover has created a lot of buzz in the internet. As speculations abound, we have gathered the major points on the implications of this takeover:

The takeover signals a fresh start for Whole Foods.

Whole Foods has recently been under major duress. In February 2017, it announced the shutdown of nine stores following stiff competition from mainstream supermarkets. In May 2017, it has experienced its seventh consecutive quarter of negative comparable-store sales. Add to this the pressure exerted by Jana Partners, which own 9 percent of the company, to sell. Last month, Whole Foods also had a major board shakeup and named a chief financial officer.

With the announcement of the Amazon takeover, Whole Foods stock reportedly soared up to 29 percent while the stocks of other supermarket chains plunged.

Mackey 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.”

Amazon Buys Whole Foods – What are the Implications?
Whole Foods store. Credit: thisisbossi

It looks like the sale was also a way for Mackey to maintain control of the company. In a Bloomberg report, he was quoted as saying, “These people [referring to Jana Partners], they just want to sell Whole Foods Market and make hundreds of millions of dollars, and they have to know that I’m going to resist. That’s my baby. I’m going to protect my kid, and they’ve got to knock daddy out if they want to take it over.” 

Whole Foods stores provide Amazon with unlimited expansion opportunities.

There are currently 431 Whole Foods locations. This provides Amazon with the physical presence that it can maximize to its advantage.

First, Whole Foods offers a way for Amazon to break into the retail industry. It will be able to expand its AmazonFresh service and allow it to go head-to-head with Google Express and other online retail services such as FreshDirect.

Second, Amazon now also has the chance to add Whole Foods offerings to its Prime Now service and its physical stores can be added to its current line-up of fulfilment centers. This redounds to better and more efficient service.

Third, Time reports that Amazon will be able to flesh out its various experimental concepts in the Whole Foods stores. These concepts include Amazon Go with its wallet-less payments; its futuristic version of Home Depot; and electronic boutiques.

Fourth, Whole Foods brings with it an affluent customer base which Amazon can tap in their roll out of new products.

Whole Foods taken over by Amazon
Whole Foods store. Credit: thisisbossi

Amazon and Whole Foods will revolutionize retail.

Amazon’s takeover of Whole Foods is expected to bring major changes to retail. Imagine the possibilities and convenience of ordering groceries through Alexa and the Dash Wand. In addition, NPD Group’s retail and grocery analyst Darren Seifer said in an interview, “Amazon brings capacities that were not in-house for Whole Foods, such as delivery. They could also add grocery pickup centers, Amazon’s ‘click and collect’ model.” Couple this with Amazon’s massive supply chain, this will likely bring costs down and ensure efficiency.

What is telling is Mackey’s statement, “They’re [referring to Amazon] at the forefront of technology. I think we’re gonna get a lot of those innovations in our stores.”

While nobody has quite spelled out yet what this statement means, there is the undisputable fact that Amazon will be able to harvest a lot of data from Whole Foods shoppers which the company can use to enhance customer experience.

Also, in the name of convenience, Amazon has been experimenting on the use of drones and autonomous vehicles for delivery. And the Whole Foods stores offer places for the docking and charging of these machines, solving previous logistical issues. This of course creates a whole new world of opportunities for the company and the future of retail.

But at what cost?

The ultimate question though is what all of these will mean for the future of retail? Will Amazon’s technological innovations in the future replace manpower in the name of cost cutting and efficiency?

Amazon Go Pilot Store - Amazone Buys Whole Foods – What are the Implications?
Amazon Go pilot store in Seattle. Credit: SDOT Photos

An Amazon spokesperson in an interview said that there will be no job cuts or increased automation in Whole Foods stores. However, in a TIME report, Mackey noted that Whole Foods in the past may have focused more on team members “at the expense of customers.”

For food makers, the takeover may seem like the start of a terrifying new era in the food industry. In an interview, Benzi Ronen, CEO of the food hub management software Fermigo said: Previously, “the brand you trusted was the manufacturer. Today you go on to Amazon and filter everything by what’s Prime.” 

What do you think about Amazon’s takeover of Whole Foods? Does this bode well for the retail industry’s future? Or do you think it’s terrifying? We’d love to hear your thoughts.

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