The Amazon-Whole Foods Deal May Revolutionize The Way We Grocery Shop

Jane Rider, rideshareguides.com

The biggest news this Friday was the Amazon-Whole Foods deal. This piece of news shocked the grocery retail sector as much as it did the stock exchange. Grocery retail industry has become problematic with too much competition saturating the existing markets. How does the Amazon-Whole Foods deal affect the grocery retail business and Whole Foods share of the market? What is the impact on new startups providing grocery shopping and delivery services to consumers?

When reading the news, I became curious about what Amazon already owns. Amazon.com, which most of us simply refer to as Amazon, began as an online bookstore. It was founded in 1994 in Seattle, Washington. It has since grown into world’s largest e-commerce company and provider of cloud computing infrastructure. Today Amazon owns many companies we are familiar with. Investopedia.com lists the ten biggest being IMDb.com, Alexa.com, Audible.com, DPReview, Box Office Mojo, AbeBooks, Goodreads, Twitch.tv, Woot, and includes Whole Foods Market on the list. Amazon owns or is a stakeholder in altogether more than 70 companies worldwide.

amazon-whole foods deal

In the direct aftermath of the Amazon-Whole Foods deal announcement, the stock market reacted by falling stock prices of other grocery retailers: Costco (-7.06), Target (-5.08%), Walmart (-4.70%), and Kroger (-9.24%) while Whole Foods gained 29.10%. Stock markets were still live when I was writing this, but one could clearly see the general trend.

Bloomberg Technology news explains well how Whole Foods investor Jana Partners has been unhappy with the store chain’s failing performance. It has urged Whole Foods either to sell or merge. Now it is selling. Amazon has knowledge and technology to implement in the grocery online sales and delivery business. Their logistics is likely to benefit Whole Foods business and change the downward trend to an upward spin. At the same time, Amazon will receive physical store locations to speed up grocery delivery to customers.

Amazon’s expertise and technology may well change the way we grocery shop not only at stores but also at home. Online grocery shopping is a growing trend. Customers have quickly adopted the services that makes their everyday lives much easier. It is not only the younger generation who are using these services. I am a part-time Instacart shopper in South Florida where most customers are middle-aged or elderly. More and more happy customers welcome at-home grocery delivery saving them the trip to the grocery store for which they do not have time, patience or capability.

Many latest news articles reporting on the Amazon-Whole Foods deal have mentioned how Amazon is a retailer with competitive pricing while Whole Foods is a retailer with premium pricing on its organic goods and commented on this odd fit. Reading between the lines, I am pondering if this means good news to the consumers. It may actually be a perfect fit. Many consumers are trying to eat healthier foods with less or no pesticides and chemicals harmful to the human body. Might the Amazon-Whole Foods deal mean that Amazon could use its resources and make Whole Foods groceries more affordable and thus dramatically increase sales? That would be my kind of volume thinking.

While the Amazon-Whole Foods deal seems like a done deal, there is still speculation that, for example, Wal-Mart could put a competitive bid on the table as mentioned in CNBC news. The Washington Post, which Amazon founder and CEO Jeffrey P. Bezos owns, also discusses how Wal-Mart has been trailing Amazon in competition. This deal will make it even harder to play the catch-up game. This news story also hints at Amazon’s wealth. That led me into thinking of another aspect how the Amazon-Whole Foods deal may indeed be good for consumers. It will mean more severe competition to other grocery retailers that have included organic products in their inventories.

Amazon is also in another way ready for this deal. An interesting side story in today’s biggest headline is Amazon’s newly acquired patent that prevents customers from performing price comparison shopping while in Amazon stores. When you log onto the store Wi-Fi, your searches for online price matches may bring surprising results. The new technology intercepts your search requests and it can block it. Better yet, it may give you a price comparison on a similar in-store item. It may suggest replacements. It may even give you a coupon for the item for which you originally searched a price comparison.

The fact that Amazon now has this patent does not mean it will use it. Or, Amazon may implement it to some extent to benefit the customer in a way that is yet compliant with the Competition law, or antitrust law, and does not alert regulators.

The Amazon-Whole Foods deal is indeed bad news for other online and brick-and-mortar grocery retailers. It will also affect the newer online grocery shopper and delivery services such as Instacart and Shipt. Instacart CEO Apoorva Mehta had not put out a tweet today, I checked. Whole Foods is one of Instacart’s investor’s. Naturally this would mean Instacart as a competitor would no longer have its shoppers shopping at Whole Foods.

Considering the size of Instacart in comparison with Amazon, the latter can easily absorb the investment as a loss. Amazon can afford to break the five-year deal Instacart signed with Whole Foods and leave Instacart struggling with its existence. Or, would Amazon be willing to acquire Instacart, as well, and integrate it to Amazon Fresh? Not likely. Amazon’s distribution technology is at a totally different level is what Cooper Smith, head of Amazon Intelligence L2, is saying in a Fortune.com coverage of today’s news. Amazon clearly does not need Instacart. Mehta commented on leaving Amazon: “I realized that my learning at Amazon was plateauing, and I was getting tired of the slow and bureaucratic environment there, so I had to make a change.” Amazon has no reason to look back.

Instacart just lost one of its major grocery retail partners. As the Amazon-Whole Foods deal makes competition in the field fiercer, will it survive on its own after this blow? Other similar services are on the same boat. So, will there be acquisitions or mergers in the news in the near future?

Posted in: In The News

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