Amazon’s purchase of Whole Foods already impacting grocery industry

Amazon’s purchase of Whole Foods already impacting grocery industry

Amazon is buying Whole Foods Market for $13.7 billion. SuperValu, with a network of 2,000 stores across the USA, took one of the biggest hits, with a 14% drop on Friday. Many stocks, including Target and Smart & Final Stores, were plummeting more than 10 percent before evening out later in afternoon trading.

When Amazon made a decision to approach Whole Foods last month, it picked Goldman for advice. This acquisition makes the online retailer a major player in the brick-and-mortar grocery store arena. Mr Bezos is known for making unconventional decisions and having big ambitions, and this could mean a more frontal assault on Walmart – a face-off between the old and the new dominant forces in the retail world.

Some industry observers say Amazon will find it hard to use Whole Foods to pull away Wal-Mart shoppers because the two stores appeal to different customers. Amazon closed up 2 percent.

Instinet analyst Anthony DiClemente said in a note quoted by CNBC that Amazon is going to disrupt grocery business.

“As Amazon has more resources, they might be able to streamline some efficiencies for Whole Foods, allowing the retailer to offer its organic and more sustainable products at more affordable prices”, said Lauren Beitelspacher, a marketing professor at Babson College in xxxxx.

The organic grocer, which was founded in 1978, would continue to operate under its existing brand. Amazon’s move aims at the heart of the Bentonville, Arkansas-based retail giant’s business – groceries, which account for 56 percent of Wal-Mart’s $486 billion in revenue for the year ending January 31. The deal is expected to close later this year. But the opening of the first store, which was supposed to happen in March, was delayed because of technical issues, according to the Wall Street Journal.

The market reverberations of the announced deal traveled beyond the retail industry – shares of food companies like Hershey and Campbell Soup slid, too. That fits with Whole Foods private-label push to compete on price, and gives Amazon a bigger foundation on which to develop its own food brands.

Any number of Whole Foods locations – more than 460 in the U.S., Canada and Britain – could be used as jumping off points for wider delivery and pickup of groceries and prepared foods ordered online. It could also put pressure on other stores to lower their prices as well, he says. “Most of us like to see what we’re buying, and it’s a good store, but we just wouldn’t buy online”, he said.

As sales have slumped, Whole Foods executives have tried to highlight what distinguishes it from rivals. These tech solutions are likely to become more common this year, according to the JLL report.

Amazon is buying Whole Foods in a stunning move that gives it hundreds of stores across the USA – a brand-new laboratory for radical retail experiments that could revolutionize the way people buy groceries.