Amazon's $14-Billion Grocery Deal a 'Threat' to Food Retailers

Angelica Greene
June 27, 2017

Amazon has massive warehouses, along with a seemingly endless supply of funds, that will completely change the industry.

For Amazon, the Whole Foods acquisition does more than just leapfrog over the technical difficulties it has had in implementing its grocery plans.

Amazon, which is sitting on US$21.5 billion in cash, has recently begun experimenting with bookstores and a small grocery but this is by far its most ambitious move into physical retail.

"I think this acquisition is a concern", he said.

Amazon will be able to use automation and data analysis to draw more customers to stores while helping Whole Foods cut costs - and perhaps prices - and better tailor its offerings to customers.

"This deal should leave no doubt that Amazon is deadly serious about dominating all aspects of retail", Paul Cuatrecasas, chief executive of Aquaa Partners, a London-based investment banking firm, said in an email.

Amazon already offers grocery-delivery services in five markets, but analysts say expansion is tough because its current distribution centers are set up for dried goods, not perishables.

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"We are always concerned when there is some loss of brick-and-mortar stores out there", Mullins said after just hearing of the news early Friday.

On Friday, Whole Foods stock closed up 9.62 to 42.68 per share, a 29.1 percent jump.

Drew Herdener, an Amazon spokesman, said in a statement the company has "no plans to use no-checkout technology to automate the jobs of cashiers at Whole Foods and no job reductions are planned". As for consumers, this purchase could increase competition between retailers and lead to lower prices on groceries as companies attempt to attract more customers and work towards gaining an edge in the market.

It's the biggest acquisition in Amazon's history. Firstly, don't forget that Whole Foods is a pretty trendy and high-end outlet with an organic focus. For 10 years, the company has offered a type of food delivery service via Fresh, but that simply won't do, it seems. The announcement also left open Amazon's own, multi-faceted push into grocery, which includes both brick-and-mortar and online strategies. Amazon's various forays into selling groceries - Amazon Fresh, Amazon Pantry, Prime Now - will get a boost from Whole Foods and its affluent customer base. Traditional grocers like Safeway and Kroger are particularly vulnerable to an aggressive play by Amazon into the grocery sector. Seen here is the Whole Foods store on Valencia Santa Clarita.

Amazon also has been testing automation technology at a Seattle convenience store that's now open only to Amazon employees.

Amazon is expected to thoroughly transform Whole Foods Stores, expanding them beyond being grocery stores to integrate them into their broader operations, perhaps including technology retail, and online-purchase ability.

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