Amazon has sent shockwaves through the retail world by announcing it’s to buy grocer Whole Foods Market.
The move, worth some 12.5 billion euros plus debt acquisition, will give Amazon a physical presence on high streets to sell fresh food and other goods.
The deal represents a dramatic turn in direction for Amazon, which has offered food delivery through its Fresh service for a decade but has not made a major dent in the $700 billion grocery market.
Analysts say it’s part of the firm’s aggresive strategy to cater for young millenials and wealthy consumers.
“If you’re Amazon, you want to push all the consumption behavior into your universe, for your money, and, also so your data is better. I think it takes one reason away to ever leave Amazon when you’re buying things. I think that’s good for Amazon. That’s why they want your cloud storage business, and your streaming video business, and your music business, and your tablet business, and your phone business, and your online clothing business, and fill in the blank,” explained Max Wolff, capital market strategist.
“Supermarkets will now have to contend with not only competition with each other and non-traditional grocers like Wal-Mart Stores Inc and Target Corp, but with a retailer like Amazon which has the financial capacity to price aggressively,” said Mickey Chadha, vice president and senior credit officer at Moody’s Investors Service.
Amazon, which is known for squeezing suppliers, will take over a natural and organic grocer pioneer brimming with 456 stores and high-end shoppers but struggling to rein in prices and integrate technology.
Amazon has been looking at stores that could allow traditional in-store purchase, online ordering with on-site pickup, and home delivery, using the store’s warehouse as a distribution point. Still, Amazon is playing catch-up in the grocery business. Wal-Mart Stores Inc already offers in-store pickup. Amazon announced a similar service called AmazonFresh Pickup at two locations.
The grocer will continue to operate stores under the Whole Foods Market brand, the companies said.
John Mackey will continue as chief executive of Whole Foods, and the company’s headquarters will remain in Austin, Texas.