Amazon shakes up retail with $13.7bn Whole Foods deal

Paterniano Del Favero
Giugno 20, 2017

A crowded local grocery market became more interesting - and probably more competitive - as online retail powerhouse Amazon announced Friday that it will buy organic foods specialist Whole Foods, which now has stores in Washington Twp., Mason and Cincinnati.

Whole Foods will continue to operate stores under its brand and will continue to be led by co-founder and chief executive John Mackey, the companies said. Although Amazon's plans for Whole Foods is not clear, the acquisition has some wondering what will happen to the chain's existing stores. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the United Kingdom could be turned into distribution hubs - not just for delivering groceries but as pickup centers for online orders.

In the USA "this adds 440 refrigerated warehouses within 10 miles of probably 80% of the population", said Michael Pachter, an analyst for Wedbush Securities.

Analysts praised the transaction as a savvy move by Amazon to enter the physical grocery space and a possible method to drive down prices at Whole Foods, dubbed with the unflattering "Whole Paycheck" nickname for its expensive food offerings.

Seattle-based natural foods co-op PCC Natural Markets has competed with both Whole Foods and Amazon for years and held its own, said Cate Hardy, PCC's CEO.

Amazon is buying Whole Foods Market for $13.7 billion.

Whole Foods wove its way into the crowded and competitive Dayton grocers market in 2015, with its first Dayton-area store, in Washington 1050 Miamisburg-Centerville Road.

Whole Foods had been under pressure from activist hedge fund Jana Partners LLC prior to the announcement of Friday's deal, prompting it to overhaul its board of directors.

And while department stores, electronics chains and other retail sectors have been closing stores, the number of grocery stores has continued to grow. Kroger sank 11.48 percent, while Costco dropped 5.64 percent.

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

Whole Foods customers who are Amazon Prime members, meanwhile, could get discounts on certain products.

At least one local shopper at the Andover Whole Foods store had a much different perspective on the deal.

"They're going to be within an hour or 30 minutes of as many people as possible", said Mikey Vu, from consulting firm Bain & Company. In an email to customers, the company said it planned to maintain the same standards under Amazon, including bans on artificial flavors and colors.

Analysts expect Amazon to put downward pressure on prices across the supermarket industry.

"This might be an opportunity for consumers who have felt that Whole Foods is inaccessible", said Lauren Beitelspacher, a marketing professor at Babson College in MA.

West Hartford resident Nancy Kennedy, 88, who stopped by the Whole Foods store to shop, said she does not go online because she's not familiar with digital technology. Then it uses sensors, computer vision, and deep-learning technology to track shoppers and what items they pick up.

Investors worry that Amazon, which has already won over hordes of shoppers of clothing, electronics and many other kinds of goods, wreaking havoc on department stores and other brick-and-mortar retailers, will do the same thing with groceries. Tonight, 1 in 10 entrees served in Americans' homes will be a "prepared, ready-to-eat" item purchased outside the home.

"These guys just want to sell us, because they think they can make forty or fifty per cent in a short period of time", Mackey told Texas Monthly's Tom Foster.

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