The story of the day, and maybe one of the most important of 2017, is that Amazon just agreed to purchase Whole Foods for $13.4 billion. This comes in the wake of Whole Foods’ investors looking for some leadership changes, namely because of dipping market share and plummeting stock prices. Amazon agreed to pay $42/share (a nice 27% boost from its current trading value) and, for now, will keep embattled CEO and founder John Mackey at the helm.
This story, though, isn’t really Whole Foods. It’s Amazon, and with it, a move towards dominating the $800 billion brick and mortar grocery business. Amazon has been trying out its Amazon Go model, with a beta store (sorry, Amazon employees only for now) getting a well-publicized test run in Seattle. The assumption is that Whole Foods, with its substantial infrastructure, feel-good business model, supplier chain, and real estate holdings will make it much easier for Amazon to push its self-service model into the fore.
Amazon Fresh, the online retailer’s successful grocery service, was already set to align with its retail model, enabling customers (theoretically) to shop online and pick up items in store without checking out. Add to that Whole Foods existing gourmet takeout food service, natural products line, and the results may be increasingly challenging for other grocery chains, namely Walmart, to compete.
It’s the Amazon v. Walmart component that may end up being the most dramatic story here. Amazon has already notably eaten into Walmart’s substantial market share. However, Amazon is posing a huge threat to another e-commerce giant: in a 2016 report, Bloom Research revealed in their annual e-commerce poll that a telling 55% of shoppers start their product research on Amazon directly. This edges out Google as the top spot for product-related searches. So Bezos has made an even bolder step into the increasingly competitive grocery business, while still eating both Google and Walmart’s collective lunch.
What does this mean for consumers? Anyone’s guess, really. It could mean that prices at Whole Foods could dip, making them an even more formidable competitor to traditional grocery store chains. It could mean that your free range, grain-free, cruelty-free dog food could show up at your door by delivery drone right along with your paraben-free hand cream and fresh poke tuna bowl within minutes of paying for it on your Amazon app. Bezos could choose to leave the Whole Foods brand intact and look for other ways to align online shopping, Amazon Prime, and, at this point: whatever else Bezos wants.
With the single exception of Walmart, there has perhaps never been a more enviable position in the history of retail than the one Bezos occupies right now. He owns online retail. His company’s search function is a more popular buying and search tool than the globe’s biggest search engine. Now, he owns North America’s most prestigious (although, yes, problem-plagued) boutique grocery chain. Amazon’s disrupter-in-chief, as of now, says that no major layoffs at Whole Foods are planned. A spokesperson for Amazon also confirmed that they have no plans to automate the checkout or shopping process at the stores.
2017 has been a tough year for physical retailers. It says something that the planet’s second richest man has officially entered that ring. For now: what it says, and what he will do, is surely to be the subject of a lot of speculation, discussion, and, if you’re Google, Walmart and Kroger, concern.