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Why Amazon Bought Whole Foods

Why Amazon Bought Whole Foods

"Over the past few years, these cracks have become more pronounced, and the company has done seemingly little to correct them".

[Amazon] has disrupted the old model of consumptions and challenged the status-quo of speed to market.

The question for many other grocery stores might wonder if they're perishable. In working toward becoming an industry leader in staple industries such as food & beverage, Amazon has announced last week its intention to purchase Whole Foods Market Inc. But activist investors who advocated a sale of Whole Foods also demanded that it cut the number of products it offers to lower its costs. The deal gives Amazon the opportunity to target the $800bn U.S. grocery market, and leverage some of Whole Foods in the rest of its operations. The deal, ironic because of Amazon's reputation for hurting physical retail locations, still needs regulatory approval. In 2016, 43 percent of all online retail purchases went through Amazon, Slice reports.

"The pressure they exert on suppliers is stifling", Mr. Lipman said. Many consumers like to buy food in person: unlike choosing a battery or book, selecting a ripe tomato requires inspecting it or trusting someone who has.

Amazon CEO Jeff Bezos draws attention - and investment - for trying outside-the-box ideas that could revolutionize retail, going so far as to predict that Amazon could deliver orders to the moon by 2020, via his private spaceflight company Blue Origin.

When asked if he had any antitrust concerns over the online-retailer bursting into the food-retail space, the Commerce Secretary said, "I haven't seen anything that Amazon has done that would qualify remotely for antitrust consideration". The same might be true about the new incarnation of Whole Foods.

Embodying this "consumer welfare" regime, Amazon has largely avoided government scrutiny by devoting its business strategy and rhetoric to reducing prices. "But given its massive buying power, Amazon could actually leverage its economies of scale to bring down prices in the aggregate and change this perception in ways that would make Whole Foods a lot more competitive".

For starters, the move helps Amazon expand into an industry that has eluded them for some time.

"Whole Foods - now those are warehouses essentially that are close to people now", Alex Doubet said, founder of Real Estate group Door. As I've said previously, cashiers and retail salespersons occupy the most common job in America, with 7.8 million Americans potentially in jeopardy of losing a job to automation down the road.

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Whole Foods blames its sales declines on the wider availability of organic foods at mainstream grocers like Walmart and Kroger. (NASDAQ:AMZN) moving more and more into brick-and-mortar stores.

The Amazon-Whole Foods combination could put even more pressure on those chains and other big grocery sellers.

If Amazon.com's plan to acquire high-end grocer Whole Foods is approved by antitrust enforcers, the $13.7 billion deal will give Amazon control of more than 400 stores, an extensive supply chain and a new source of consumer data. However, analysts think that Amazon's own depth of resources - plus the value of its platform to Whole Foods - would win out over the potential bid. Fundamentally, the new owner of Whole Foods will have a different time horizon for success than Whole Foods experienced, particularly in recent years when growth slowed, he said.

Physical stores aren't going away - delivering food to customers' homes remains a costly process, especially for produce and other fresh items - but tomorrow's brick-and-mortar stores will have to know their customers very well. "I think we're gonna see a lotta technology". In contrast, Whole Foods is intimidating to customers seeking affordable prices: it has a strong brand but also high prices.

"We just had these big grins on our faces, like, "These guys are incredible.' They're so smart". "They're not stupid enough to go change that".

"It was truly love at first sight", Mackey said, to laughter from his audience, according to the transcript. This is a way for Amazon to provide better service to those customers and attract more of them.

Of course, a union with Amazon could hurt Whole Foods' image on food quality.

Should we be concerned that Amazon will have a monopoly on the economy along with Google and Apple?

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