Amazon, a electronic commerce and cloud computing company bought Whole Foods, a supermarket chain, for approximately $13.7 billion in cash Friday, June 16th, according to CNN.
“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” Amazon CEO Jeff Bezos said to CNN.
Okay, so consumers, at least OG Whole Foods customers, are more than likely pondering what this transaction entails, and we have clarity. After the move, an Amazon statement said Whole Foods will continue to operate as its own brand, according to CNN, and keep their CEO John Mackey as well. Also, the headquarters will remain in Austin, Texas. So, let’s zone in on why Amazon made the move.
According to CNN, the transaction shows Amazon’s interest in moving into the business of operating traditional brick and mortar stores. To clarify, a brick and mortar store is essentially a brand name store such as McDonald’s, and it’s golden arch, and the physical presence the brand’s building has. In addition, Amazon is interested in groceries, establishing their own delivery service, AmazonFresh, where consumers can buy groceries online and pick them up in person.
But, I don’t think the rest of the supermarket business approves Amazon’s latest venture, as top stores such as Kroger (KR), Target (TGT), Costco (COST), SuperValu (SVU), and Sprouts’ (SFM stock all went down the same day of Amazon acquiring Whole Foods. That said, S&P Global Ratings reported that Amazon may need to take on more debt after acquiring Whole Foods, according to CNN.
Contrarily, the transaction may save Whole Foods. Since 2015, the company’s been battling accusations that they were overcharging customers in New York. In addition, John Oliver performed a skit about said high prices, both slowing sales growth for the supermarket.
It’s time to address the elephant in the room, and that’s the expensive pricing of Whole Foods’ products. Because, there’s always truth in a joke. Essentially, it’s the dilemma everyone on the outside looking in is pondering, as Amazon is historically known for their low prices. Logically, the two companies will probably meet somewhere in the middle, not too cheap and not too expensive.
Now, let’s shift our attention to Amazon’s potential technology incorporation into Whole Foods services. Dream scenario, consumers are able to purchase their Whole Foods items online, and have them delivered within two days using Amazon Prime. In all seriousness, we can expect all of Whole Foods’ apps, website, to more than likely appear under Amazon’s web service.
And as previously stated, Amazon does have their Amazonfresh service where consumers can order products online then pick them up in person. So, it’s not out of the realm of possibility to say Whole Foods becomes apart of the service. Essentially a move solely benefiting Amazon, Whole Foods would become a viable brick and motar store for consumers to retrieve their ordered online from. As of right now, that’s what Amazon’s service is missing.
Also, apparently Amazon’s working on an idea they dubbed Amazon Go, according to Motherboard. Essentially, it’s an automated store tracking what you put into your cart, and bills you when you’re done via a smartphone app. Innovative, yet costly to employees, the potential idea may become the wave of the future for supermarkets in general. But, Whole Foods appears to be first in line if the idea gets launched.
Imagine this, you walk into a supermarket, put your items into your cart, and walk out, never having to deal with poor customer service again. Soon enough, people wouldn’t have to communicate with each other at all, using their smartphones as crutches. Well, we don’t know what Amazon and Whole Foods have up their sleeves, but that didn’t stop us from speculating.
Let us know your thoughts below!