Takeaways From Amazon's Acquisition Of Whole Foods

Takeaways From Amazon's Acquisition Of Whole Foods

On Friday, Amazon announced it was buying the upscale grocery chain for $13.7 billion in a deal that will likely have a profound impact on America's retail and grocery industries.

As a result, Whole Foods could also implement digitalized checkouts, along with reducing prices, and revamping the assortment of products. To remain competitive with Wal-Mart (WMT) and Kroger (KR), Amazon (AMZN) will have to slash Whole Food's (WFM) sky-high prices, leaving local business owners in the dust. "I think that where Amazon may add the most value is to speed up the process of perfecting the 365 by Whole Foods model and scaling it quickly thanks to its greater resources". The top 10 grocery retailers plus Amazon control less than half of the market, Blackledge says, and a patchwork of several hundred grocery chains, convenience stores, dollars stores as well as mom and pop stores make up the remainder.

Amazon now has a grocery delivery service called Amazon Fresh, available in about 20 cities in the USA, but it struggled to make enough headway in becoming America's grocer.

He also added that Amazon is "not stupid enough" to mess with Whole Foods' high food-quality standards, but did hint at the possibility that "over time, there could be other formats that evolve that ... wouldn't be to our standards". The Seattle-based company already offers discounted Amazon Prime memberships for people receiving government assistance and is part of a pilot program to deliver groceries to food-stamp recipients. Amazon, which made a splash a year ago with a checkout-free grocery store, has said it has no plans to automate the jobs of Whole Foods cashiers.

The Whole Foods Market in Midtown New York is seen on June 16, 2017.

And grocery may take a middle path, says Kimberly Scott, a portfolio manager at the Ivy Mid Cap Growth Fund, which counts Whole Foods stock as one of its biggest investments.

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Analysts predict big changes for grocers following Amazon's surprise purchase of Whole Foods, NBC News reported.

At Whole Foods, technology would enable people to pay using their smartphone, instead of seeing a cashier, or even using a kiosk, a source told Bloomberg. Amazon's resources and technology might help expand those stores, some analysts say.

Amazon is known for taking the long view.

After all, it was Whole Foods' CEO who referred to Jana in a Texas Monthly interview earlier this month as "greedy bastards".

Aaron Turner, a Los Angeles-based analyst who covers Grubhub for Wedbush Securities, wrote in a note to clients Monday that the tech giant's plans to buy Whole Foods for almost $14 billion set it up for a larger food ordering and delivery play.

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