Why would Amazon want to buy Whole Foods? In working toward becoming an industry leader in staple industries such as food & beverage, Amazon has announced last week its intention to purchase Whole Foods Market Inc. That’s a major move, and one that traders should be watching. News accounts tell how Amazon exploits data collected on the businesses using its platform to go head-to-head with them.
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Supermarkets haven’t experienced the upheaval that, say, department stores have, but the changing retail landscape is affecting storefronts of all kinds as falling traffic is bad for any brick-and-mortar business. High stock velocity is key to getting the economics of food retailing to work given the low margins in the industry. This is a whole new world. Amazon’s logistics and extensive adoption of automation and technology can make Whole Foods more economically accessible.
Walmart is the only company with the financial might to play ball with Amazon. Both companies race to the bottom on pricing.
“They aren’t going after the Middle America market”, said Cooper Smith, Head of Amazon Research at L2 in an interview with Retail TouchPoints. Wall Street recognizes the reality of Amazon’s market dominance. But activist investors who advocated a sale of Whole Foods also demanded that it cut the number of products it offers to lower its costs. But let’s rewind for a second to December, 2016, when Amazon announced their automated grocery stores. With its purchase of Whole Foods and the hundreds of grocery stores it operates, Amazon has an opportunity to expand the products it can deliver under Prime Now.
“Until death do us part”, Mackey said. But grocers have had little to fear from the rise of online retail.
Retailers including Walmart could challenge Amazon for a takeover of Whole Foods Market, according to a note Thursday from J.P. Morgan analysts cited by CNBC.
One of the last frontiers for online shopping to conquer is groceries.
He said as online shopping keeps growing, the quest for social experiences remains a constant. “Retailers need to look at their store network and figure out how they can best improve that network to do that last mile delivery as cost-effectively as possible”. Whole Foods Market shares closed at $43.26 Wednesday. Kroger has almost 2,800 stores that operate under a variety of names. Yes, it does over $140 billion in sales annually, and acquiring Whole Foods adds another $15.7 billion in fiscal-year sales, but that’s not really a lot when you consider industrywide revenue, and it’s still miles south of the sales that Walmart racks up.
As consumer habits change, grocery chains will have to continue to adapt, and that likely means increased costs, at least in the near-term. Grocery distribution isn’t a problem they’ve solved yet, but with the power of fulfillment centers, the distribution chain is likely to shrink.
Amazon drastically altered shopping behaviour in nearly every possible product category imaginable – except for food… until now.
Several PREIT malls also began adding Amazon lockers past year for convenient pick-up of online orders from the retail juggernaut. There’s been a lot of speculation about Amazon’s motives. Its multiple store locations could help Amazon save money and time, Vyas said. So far, it’s in the testing phase in Seattle and only available to employees. Most importantly, selling food is another way for them to attract and retain customers, especially if tied to the Amazon Prime subscription service. It’s all linked by a smartphone app. When we go to the store, we can choose what we like and pick only high-quality produce. Albertsons buying Safeway, Kroger acquiring Roundy’s and the owners of Giant, Stop & Shop and Food Lion joining up are just a few examples.
Kitchens expects store footprints to get smaller.
Amazon’s size and reach allow it to beat most competitors on price.
The overlooked asset Amazon gets in the deal is Whole Foods’ 365 house brand-one of the most coveted in the organic and natural space, private label and otherwise.
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The investing thesis appears to be that Amazon has hurt most retailers, therefore it will eventually hurt Costco.
