Amazon Eats Whole Foods and What That Means
So by now you've read the headlines. In a deal that surprised many, Amazon entered an agreement to purchase Whole Foods Market for $13.7 billion dollars. A deal that, in effect, connects the leading internet retailer to the innovative natural foods grocer. So. Amazon acquires Whole Foods. But what does that mean?
The e-commerce mogul has previously attempted to get into the food business through various avenues for several years now. While the news is surprising to some, Whole Foods did report its worst performance in a decade back in February. This statement was released along with the closing of nine stores, the most at once in the company's history.
So perhaps the merger shouldn't come as a complete shock to those paying attention. As more and more grocery stores have started to incorporate organic and "natural" food options at more affordable price points, this merger could give the company room to make a much needed investments in technology services for restaurants and infrastructure to, hopefully, drive down cost.
At this preliminary stage, not many details of how the partnership may evolve have been disclosed. We know that co-founder and CEO John Mackey will remain with the company. We also know the company will maintain it's current headquarters in Austin, Texas.
What do these two seemingly unrelated companies have in common? What could the end goal here be?
• Well, many speculate meal delivery. Instead of taking a chance on a new and less-established service like Blue Apron, Amazon could prepare and deliver meal kits from the well-known, trusted and health-conscious brand, Whole Foods.
• This past February, Whole Foods announced their move into the fast-casual space with Roast in Atlanta. This is a made-to-order establishment inside the market that will include bar service in the evenings. Currently the market operates about 280 restaurants inside their store, ranging from this to sushi bars to sandwich stands. With Whole Foods focus on revamping the physical space, and Amazon's attention to the digital, this acquisition has enormous implications for the way we grocery shop.
Possible Impact on Traditional Grocery Stores
• After these places realized the trend of natural foods pioneered by Whole Foods was viable, they jumped on the bandwagon and were able to beat them in regards to price point. Thus, helping to make the "natural foods" trend more mainstream. In this way, Whole Foods has benefitted these places. It offered an example of how the same or similar items were being sold with the Whole Foods brand attached at a much higher price. If Amazon's buying power can bring their price down, it could definitely add pressure to these places like Costco or Kroger.
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