Jeff Bezos-led Amazon is all set to acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market's net debt. Whole Foods shares were trading just above that level on Friday, as investors saw negligible regulatory risk to the deal closing.
Armed with giant warehouses, shopper data, the latest technology and almost endless funds - and now with Whole Foods' hundreds of physical stores - Amazon is set to reshape a US$800 billion grocery market that is already changing rapidly. According to the deal worth US$13.7 billion (£10.7 billion) the retail grocery store chain is to keep the Whole Foods Market brand name and John Mackey is reportedly to remain its CEO. The company is in the process of testing delivery services for groceries in three different cities but they do not include Seattle as of yet.
The "implications ripple far beyond the food segment, where dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks", O'Shea said. In the first quarter this year, food-and-drink sales at American brick-and-mortar stores were down by nearly $3 billion even as grocery trips rose, according to market research firm Nielsen.
The deal unites the online juggernaut with the grocery store chain that fell behind as the organic and natural foods it helped popularize expanded to more locations and shoppers found "good enough" alternatives. Although Amazon's plans for Whole Foods is not clear, the acquisition has some wondering what will happen to the chain's existing stores.
"Peter Belanger of Newington, Connecticut, who was shopping at a Whole Foods in West Hartford, said he didn't think he'd be interested in groceries online. A lot of people will love that", said Whole Foods customer Brad Anderson.More news: Scoring Specialist Hector Moreno Rescues Mexico In 2-2 Draw With Portugal
Hartmann said he expects the online retailer to introduce some efficiencies to Whole Foods' operation. Prime membership for groceries cements a relationship with a grocery store, and it encourages members who have not shopped there to shop in Whole Foods. This will help Whole Foods understand its customer better and have the right products at the right price at the right time.
Walmart, which has the largest share of the US food market, has already been pushing harder into e-commerce to build on strength in its stores and groceries. Amazon also offers grocery shipments elsewhere, but that's tough with perishable foods.
Backed by its delivery network, it has entered the USA grocery market in recent years with limited success under a brand name known as AmazonFresh. The deal is expected to close by the end of the year.
Perhaps the most tantalising aspect of this purchase is whether Amazon might make a similar move here in the United Kingdom and snap up a chain of supermarkets to further cement its toe-hold in the grocery market. "We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer".
Amazon Go doesn't employ robots to stock shelves - at least not yet.