Amazon.com Inc said late Friday it would buy Whole Foods Market Inc for $13.7 billion, in an embrace of brick-and-mortar stores that could turn the high-end grocer into a mass-market merchant and upend the already struggling US retail industry.
"We want to assure you that Amazon shares Whole Foods Market's deep commitment to quality and customer service". Currently, WFM operates approximately 460 grocery stores among the U.S., Canada and the United Kingdom, giving Amazon more operational points in major cities and suburbs. AMZN has already attempted to carve out a piece of that pie (pun intended) with its AmazonFresh service, which lets members place grocery orders online and schedule delivery, much the same way as they can when purchasing other items.
With the Whole Foods deal, the company acquired a top-notch brand name with more than 400 stores, most of which are in upscale neighborhoods, for a reasonable price. Gartner retail analyst Robert Hetu said Amazon could bring pieces of that to Whole Foods to further cut costs.
The deal represents a dramatic turn in strategy for Amazon, which has offered food delivery through its Fresh service for a decade but has not made a major dent in the $700 billion grocery market.
- Sysco. The food distributor sank $1.15, or 1.2 percent, to $54.38.
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"Amazon's been signaling for about one or two years that they're going to make big bets, because they can, because they've got the cash flow to do it, so that makes this less of a surprise", said Mahaney, an analyst at RBC Capital.
Food industry experts say the online giant tapping into the brick-and-mortar world is a game-changer for traditional grocery chains. Seen here is the Whole Foods store on Valencia Blvd.in Santa Clarita.
"There's no value in Amazon keeping the status quo at Whole Foods".
Since Whole Foods is a publicly traded company it could be scuttled if another bidder decides to offer a lot more money for the grocery chain.
"Amazon is an innovative company and we are excited about our partnership".
Amazon could also get a better picture of customers by marrying data from Amazon and Whole Foods' loyalty programs.
It's unclear what Amazon will do with Whole Foods stores as they will remain under the Whole Foods brand and under Mackey's guidance, but Amazon will likely use them to expedite delivery and as a testing ground for any number of tech and customer-focused experiments. The deal comes just months after Walmart's $3.3 billion purchase of Amazon competitor Jet.com.