In June, Amazon announced it’s buying Whole Foods, the grocery store of choice for upscale, urban dwellers, for $13.7 billion. The move to invest in brick and mortar locations may seem like a confusing choice for the Internet giant who is squeezing profits from the retail industry, but this deal will allow Amazon to have a leg up in the booming food industry as a delivery service, like Blue Apron and HelloFresh.
By owning Whole Foods, Amazon essentially bought more than 400 warehouses for their products in large cities and in very close proximity to people who would be willing to order food and groceries for delivery. Dennis Berman, the Wall Street Journal’s financial editor, tweeted:
Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.
— Dennis K. Berman (@dkberman) June 16, 2017
The biggest competitive edge Amazon just put in its shopping cart: data. Now, Amazon will have a lot more data available to them to learn about how people shop for food and potentially how they shop for other items in their grocery store.
What Businesses Are Affected By This Move?
After news of the purchase, major grocery retailers like Kroger and Costco saw their stock prices dip. Instacart, a grocery-delivery service with a good relationship with Whole Foods, may also be feeling the pinch of the steep competition.
Meal delivery services should also be on the lookout. With this new acquisition, Amazon could offer meal kits at a lower price and a quicker delivery timeline.
Lastly, Walmart is another major business who may be feeling the heat. As Wal-Mart struggles to catch up to Amazon’s online retail prowess, they still take the cake on having the most market share of the U.S. grocery market. However, Amazon continues to pull away with agile and intelligent business moves digitally.
- Amazon to buy Whole Foods Market in deal valued at $13.7 billion – The Washington Post
- Why Amazon Bought Whole Foods – The Atlantic