The recently announced Amazon Whole Foods purchase has created a big stir in the US grocery sector. Amazon has taken its first major step into food retail. It has had an eye on retailing groceries for some time and has finally taken the plunge by buying Whole Foods Market. Amazon will pay $42 per share in a $13.7 billion (£1.7 billion) deal that has sent shares of rival businesses in grocery retail tumbling.
Founded in September 1980, Whole Foods has its HQ in Austin Texas. It arose from a smaller company, known as Safeway, which originally focused on organic and healthy foods. This firm was founded in Austin in 1978 and parodied the name of the supermarket giant, Safeway. After merging with Clarksville Natural Grocery, also in Austin, the combined company was named Whole Foods Market. It now has over 460 stores in the US, UK and Canada.
According to Jeff Bezos, the chief executive and founder of Amazon, Whole Foods Market makes it ‘fun to eat healthily’ offering ‘the best organic and natural foods.’ Until Amazon came along, Whole Foods had been suffering from increasing competition and falling sales.
The company has been coming under severe pressure as increasingly more retail businesses began selling organic produce – Whole Food’s core products. Its shares had been believed to have been undervalued, and Amazon offered 27% over Thursday’s closing share price. Once this deal has been completed, there may be good news for consumers.
The established grocery providers within the USA will have to respond to this Amazon initiative. To complicate matters, Lidl is expanding its stores into the US. This adds another low-cost grocery chain into the equation. The traditional US stores in this market sector, such as Walmart, Target and others will have to respond – but how?
Price cuts and streamlining their home deliveries are the only ways open to traditional American grocery stores to defend their turf. In fact, depending on Amazon’s intended business model for its grocery division, they may even decide to sell though Amazon rather than to change their own business model.
Many well-known retailers of all kinds of goods worldwide offer their products on an Amazon webpage. It is also a target for affiliate marketers who promote Amazon products on their own websites in exchange for a percentage of each sale. Without a doubt, the Amazon Whole Foods purchase has set the grocery sector alight. Perhaps only those with the imagination to compete in the best way possible will survive. Who Knows?
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