Online retail giant Amazon.com announced Friday that it is buying organic grocery chain Whole Foods (WFM) for $13.7 billion in cash. Whole Foods stores will continue operating under that name as a separate unit of the company.
Is this deal surprising?
I guess it depends on your point of view. Despite Amazon’s firm hold online, the company has interest in moving into operating traditional brick-and-mortar stores. Ironically, because of their strength, many longstanding retailers that have been crippled by Amazon’s growth have announced a series of store closings.
The purchase of Whole Foods also shows Amazon’s growing interest in groceries. Its AmazonFresh is experimenting with a “click and collect” model – offering customers to buy groceries online, then pick them up in person.
The supermarket business, like many other parts of retail, has been hit hard by increased competition from Amazon.
What does this deal really mean?
This is definitely a wait and see situation. As a loyal Whole Foods shopper, I wonder if the quality of Whole Foods products will be affected. One upside would be the delivery of organic foods through the AmazonFresh model. Or even the buy online and pick-up later aspect (as mentioned before) could be a big help to personal grocery shopping.
One thing is for sure, if you are on the board of Wegman’s or Kroeger’s, you’ll definitely be worried. The one thing Amazon knows is how to gain and maintain market share.
Another question to ask is – why is Amazon so interested in food? Everyone has to eat. Interest and demand in organic food continues to grow*. Overall shopping experience continue to gravitate towards online. So if you can combine and expand the best of both worlds – why not?
Despite relying on smart phones or apps for shopping experiences, some aspects of food shopping will remain personal. How do you know that a piece of unfrozen fish is really fresh online? You probably can’t.
Hopefully Amazon will only add features to the Whole Foods experience. And not take the best part of food shopping away.
*Organic food sales hit 43 Billion in 2016 – according to the Organic Trade Association’s (OTA’s) 2017 Organic Industry Survey.