As early as June 17, the e-commerce giant, Amazon said it had acquired Whole Foods Market (WFM) for a consideration of $14 billion, including an assumption of the latter’s debt. WFM will function as the independent arm of Amazon and will continue to operate stores under its own brand and procure products from suppliers and partners. Also, John Mackey, the Co-Founder of WFM will run the business as its CEO from its headquarters in Austin, Texas. The deal is likely to be firmed up in the second half of the year. The share prices of many firms including grocery chain Kroger and Target and Costo tanked, while the stocks of Whole Foods Market show an upward tick of 28%.A senior analyst from IBIS World, Madeline Hurley told E-Commerce Times, large grocery stores such as Kroger and Albertsons will be the worst affected. She said Amazon’s resources and the online channel will make it a potential threat in the food retailing market and added that Amazon will not be in a position to take on the might of large grocers through multiple channels.
Online Grocery Boom - Tom Caporaso, CEO of Clarus Commerce told the news portal, “With the purchasing power that a partnership brings, and the innovation that Amazon has already introduced with its 'checkout-free' grocery stores, prices for high-quality organic produce and prepared foods could decline significantly, putting pressure on a low-margin industry. With this merger, Amazon will also be able to invigorate the popularity of a highly fractured online grocery and delivery market, with the rollout of Amazon Fresh nationwide.”Purchasing Pattern -The e-commerce buyers in the US have the propensity to purchase only specific products and they do not make large purchases as their online shopping is infrequent too, says Fund Global Retail and Technology. The U.S. online grocery industry is all on the cusp of a boom, with the involvement of major retailers such as Walmart and Kroger, suggested Fund Global. This trend is expected to accelerate into 2017.Advantage - As its stores were based out of urban centers, WFM’s growth in the online commerce was on a slow pace. "Although Whole Foods only holds 2.7% of the market, Amazon's resources and the online channel will make it a larger threat in the food retailing market," Hurley pointed out.Obviously, Amazon will utilize WFM’s existing infrastructure to shake up the brick-and-mortar market," Hurley said and added, "while taking advantage of its supply chain to make the online side of the business more cost-effective."Pricing - Amazon and Whole Foods take diametrically opposite approaches to pricing. Amazon tends toward competitive pricing, while some of Whole Foods' products are so expensive the company has been dubbed "Whole Wallet." Whole Food’s products are priced high and with the acquisition, Amazon is likely to slash the prices, a strategy that will eventually help WFM to come out of the quagmire.Brick-and-Mortar Benefits -"Online grocery sales are expected to continue growing as more consumers trust this channel. However, consumers will continue to shop at brick-and-mortar locations. The Whole Foods purchase doesn't necessarily mean Amazon will shift it into an online grocer. Amazon has experimented with the brick-and-mortar format but has struggled to find a plan that works on a grand scale”, Hurley added.