Amazon buying Whole Foods, What does it mean for retailers?

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Last Friday’s bombshell news seems to have taken many by surprise.   We received dozens of emails about it.   Surely it’s a good move for amazin’ Amazon, and probably a good (graceful) wind-down strategy for the beleaguered John Mackey of Whole Foods, who’s been hounded by shareholders and stakeholders (employees and customers) for years.

This acquisition is not a surprise

This IS history repeating itself. Sears Roebuck – which began as a mail-order company offering an enormous level of inventory and options (maybe the equivalent of today’s Internet company) did the same thing a century ago. It came on like a steamroller – redefining what retailing was all about and many businesses could not compete with Sears.

(Trivia – Sears didn’t open their first retail store until 1925 (source – Sears Archives) – that is less than 100 years ago– 92 years ago to be exact.        

Then came WalMart – barreling down the retail highway and doing to Sears and Kmart in kind. And wiping out a plethora of micro-sized businesses on Main Street in America. The anti-Walmart articles of the last few decades have cried bitterly about the decline of the small town Main Street at the hands of the evil Walmart – but the population voted with their pocketbook.

(Trivia – Walmart didn’t open a store outside of Arkansas until 1968 – that is 49 years ago.)

Now it’s Amazon taking market share from retailers by offering good value, quick service, a vast inventory (exponentially beyond the old Sears and Roebuck catalog) and pioneering technical efficiencies in a new world environment.

It’s the same creative destruction embraced by the wallets of hundreds of millions of consumers in the past, even as it leaves our consciences a little uneasy.  Amazon doesn’t own the future of retailing, however, any more than Sears or Walmart did in their times – but it sure feels like it today.

Ironically, the $13.7 billion dollar announcement had the effect of wiping out nearly a collective $40 billion dollars of its competitors market value – Kroger ‘s stock price dropped over 9% that day.  And yet, subsequent to the announcement the price of Whole Foods stock is popping up above the purchase offer price, suggesting that other prospective buyers may emerge and make an offer for WF stock.

So, what do industry executives think about it?

“This changes the game completely for so many grocery retailers and has put Amazon in a perfect position to push the boundaries of the grocery segment. We will quite likely see them continue to push to sell more than just groceries as well as continue to trial more store innovations. One of the most obvious obstacles for Amazon going after the brick-and-mortar grocery market in 2016 was the lack of physical store shelves, which is so critical in grocery. This has changed overnight for Amazon. The purchase of Whole Foods will make the online grocery space even more competitive, which is why it will be so important for grocery retailers to have consistent online and in-store pricing. For grocery retailers to even think about competing with this new juggernaut, the industry must have the ability to control and drive in-store pricing and promotions with speed, agility, and consistency.” –Paul Milner, Marketing Director, DisplayData

Over 70% of US Households making $112k a year have an Amazon Prime account. There is a very high correlation of these shoppers being the shoppers that go to Whole Foods.  There is mounting evidence that wealthier consumers are no longer choosing luxury items like cars and boats to show status, but rather leveraging healthier food choices and education options as class markers.   Kelly Sayre IHL Services

“The concept of a friction-free shopping experience, that dissolves the lines between brick and mortar locations and the digital world, is a winner – Amazon recognizes this and is moving to execute that fantastic vision. Buying the 400+ Whole Foods Market locations may just be their new starting point.  With this, the battle lines are being drawn quickly.  Some will run for the exits, while others will freeze with fear and doubt. Think of the old saying, “When you’re being chased by a bear, you don’t have to outrun the bear, you just need to outrun the guy running next to you.”  With that in mind, look out for those local and regional retailers who are prepared to take a stand by moving quickly to dramatically up their technology game.” – Pete Catoe, Founder and CEO, ECRS

“Amazon’s news to acquire Whole Foods may seem shocking, but they are continuing on a mission to provide seamless customer experiences. We know Amazon has been investing in the grocery space for some time, starting with Prime Now and then moving into AmazonFresh…. This deal gives Amazon the seal of approval for the quality products that Whole Foods has earned over decades. … Additionally, this acquisition will make Amazon a huge omnichannel juggernaut in one swift move, taking them 15 physical stores to well over 400 overnight.” – Jennifer Sherman, SVP of Product & Strategy, Kibo

 “Amazon’s acquisition of Whole Foods goes way beyond just grocery. This is a major wake-up call for all of retail. What this means for retailers, in general, is that they need to get their omnichannel strategies in play – FAST. A retailer’s best option is to invest in order management, highlight that they offer click and collect services, and provide the best service possible on that in-store drop in.” – Charles Dimov, director of marketing, OrderDynamics

“Amazon’s acquisition of Whole Foods addresses its two greatest weaknesses – a lack of physical stores and a strong grocery play – while potentially creating even greater advantages for its greatest strengths – endless aisles and customer data. Bringing hundreds of physical locations under its control will allow Amazon to understand consumers at a much deeper level, enabling them to personalize the experience, both online and in store, to an unprecedented degree.” – David Buckingham, CEO, Ecrebo

“Whole Foods has over 430 stores globally; meaning Amazon has acquired more than 430 new properties to use as distribution centers. Retailers already concerned about Amazon’s strength in digital commerce now need to contend with the reality: Amazon is coming after brick and mortar, too. I talk with retailers every day who are in denial of Amazon’s impact on their business. But Amazon understands that retail and distribution have changed forever. It’s no longer about buying and reselling products, but about creating incredibly valuable ecosystems. ” – Adrien Nussenbaum, U.S. CEO and co-founder, Mirakl

This news has the whole grocery industry waking up today with a realization that the playing field just changed dramatically. I doubt other Retail sectors that compete with Amazon understand the impact of how now having the large treasure trove of data on customer’s grocery, health and well-being buying is going to enable Amazon to be an even more ruthless competitor in every retail sector whether it is shoes, baby products, apparel, electronics, or any of the other 400 million + products it sells.– John Squire, CEO, DynamicAction

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