Amazon Buying Whole Foods Could Mean Pain for Costco
For years now, the name Whole Foods has been synonymous with high-margin health food.
“The grocery business is a huge market, and by tapping into that and leveraging their e-commerce dominance, Amazon is in a position to increase its brand awareness with customers beyond books and gadgets, and especially when it comes to making food choices”, says Lim.
Amazon is known for driving sales at the expense of profits, Stifel analyst Mark S. Astrachan noted, saying the company will likely maintain that approach as it looks to build market share in groceries. Walmart announced recently they would ask some employees to deliver items on their drive home from work-a pretty dramatic idea.
In February, a source told The New York Post that “Amazon will utilise technology to minimise labour” at new, machine-automated supermarkets that could operate with as few as three employees.
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. “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”.
In this May 3, 2017, photo, people stand outside a Whole Foods Market in Upper Saint Clair, Pa. Amazons planned $13.7 billion acquisition of Whole Foods signals a massive bet that people will opt more for the convenience of online orders and delivery or in-store pickup, putting even more pressure on the already highly competitive industry. How that experiment has panned out so far we don’t know for sure.
Amazon’s $42-a-share offer amounted to a 27% premium above where Whole Foods’ stock had closed the prior day, at $33.06. That’s a significant boost in numbers for the Seattle company, which now operates fewer than 100 distribution centers in the U.S.
Photo by David Ryder / Stringer / Getty Images. But Parikh added that activist investors have a stake in Whole Foods. They really are. And one of my takeaways is that, by God, we’re gonna become as customer-centric as Amazon.
Experts note that most Whole Foods shoppers are already familiar with Amazon and are lining up for what could be a smooth transition.
“We’re seeing a lot of hand-to-hand combat in the grocery industry. And I think it would be insane to change them”, said Jeff Wilke, chief executive of world-wide consumer at Amazon, at the Whole Foods town hall.
About a month and a half ago, a consultant connected Amazon Chief Executive Jeff Bezos and Mr. Mackey, after the two companies had started talking about a potential deal, according to people familiar with the matter. The deal is largely being seen as a way for Amazon to move more into the brick-and-mortar space, which is not new for the company.