Amazon Buys Whole Foods: Here’s How The Deal Will Likely Affect Other Food Players
Amazon could be sparking major changes in the food industry with its recent acquisition of Whole Foods for $13.7 billion, deemed a major capture of brick-and-mortar stores to further expand its retail business.
It seemed that the Seattle, Washington-based e-commerce company’s own food delivery service through Fresh simply won’t cut it, so it acquired the natural and organic products pioneer with 456 stores and a clientele of young, high-end shoppers.
Online: A Force To Reckon With
Last Friday, when Amazon announced the acquisition, shares of Walmart as well as Target, Kroger, and Costco all tumbled. Only expectedly so, as grocery stores in the last few years have been fighting online as well as overseas players coming into the industry.
Amazon’s latest move is believed to reshape the $800 billion grocery market already beset with so many changes.
“This shows that online is going to be very dominant in the grocery business — and very quickly,” said Errol Schweizer, a former Whole Foods executive.
These online retailers are taking on a number of major firms dominating the supermarket scene for so long, including Walmart supercenters, Safeway, and Publix. The grocery giants like Walmart, however, have so far managed to maintain their edge of having more stores nationwide, swiftly penetrating e-commerce, and establishing grocery pickup at many of those stores.
Changing The Food Retail Landscape
Here’s how a number of conventional and online food players would likely fare given this newest development in the industry:
Walmart: Tech Crunch pointed out that Amazon seeks to become Walmart before Walmart becomes Amazon. While already extensively operating in food pickup, Walmart is yet to innovate in grocery delivery specifically. The website cited an opportunity for the company to buy another entity with the logistics expertise to fill that said gap.
Costco: While it’s not particularly known to be techie, the company remains the third biggest supermarket chain worldwide, trailing Walmart and Carrefour in France. With the right partner, it can compete better against Amazon.
Instacart: It’s a trailblazer all right, offering delivery at a time in the United States when very few grocery stores did. It is made out to be an Amazon rival with its market size and current valuation of $3.4 billion. Note, though, that one of its investors as well as partners is Whole Foods, either shaping Amazon to be a shareholder or Instacart as an acquisition target itself. Ask potential Amazon competitors in the form of Walmart or Costco.
Google Shopping: Google also have ties with Whole Foods, and one possibility with the recent Amazon acquisition is transferring deliveries to Amazon, and far away from Google. It remains to be seen if Google will look for more food store partners.
Meal-kit companies: Whole Foods is also known to offer plenty of prepared food, so Amazon could be positioned to bank into this operation that allowed the likes of Blue Apron to propel itself to an IPO from being a humble startup business. Blue Apron and many of these other meal-kit providers are well-resourced for storing and selling fresh food, and they are already in good metropolitan areas to begin with.
Whole Foods began its business in 1978 in Austin, Texas, building a name around healthy eating and fresh, local produce, usually with steep price points.