Late last week, the retail world flipped upside down when it was announced that Amazon had entered into the beginning stages of a $13.7 billion acquisition deal for Whole Foods.
Online delivery of groceries so far has been tough for any company to pull off because of customers' concerns about the quality of meat and produce, Wedbush Securities analyst Michael Pachter said.
That's why it's so unlikely that Walmart would counter Amazon's offer for Whole Foods.
That said, Mr. Mackey told his Whole Foods colleagues to expect significant change from a corporate perspective.
Amazon is a retail juggernaut hunting for ways to dominate groceries.
Kroger Co., for instance, has touted the opening of Murray's cheese shops in some locations. "That worries me", one bagger at a Providence, Rhode Island, store said.
He warned that Amazon already exerts risky influence "over America's markets for books and music, and is fast consolidating control over other key flows of information and ideas". Its acquisitions include Ralphs on the West Coast, Roundy's in the Midwest, Harris Teeter on the east coast, and a host of other notable operations, like prepared-foods specialist Mariano's in Chicago.
Whole Foods is now owned by a company which did not exist 25 years ago, and which prioritizes growth and evolution over profit. Could you make grocery checkout lines invisible, the way Amazon is trying to do with its experimental grab-and-walk-out convenience store in Seattle? They're so authentic. They say what's on their mind. That's not something to get really excited about just yet, however.More news: Zach Johnson making an early move at Erin Hills
Maintaining the right balance will be critical.
Walmart is already the biggest grocer in the United States, and its grocery sales account for more than half of its revenues. Kroger has almost 2,800 stores that operate under a variety of names.
At least one local shopper at the Andover Whole Foods store had a much different perspective on the deal.
Now the company has put into motion a huge retail game changer. Instacart, which operates in 69 markets, counts partners including Costco, Publix, Target and Wegman's. But overnight, Amazon is the number one brick-and-mortar seller of natural and organic foods in the USA, and if Amazon can parlay that out to grocery overall the rewards are potentially vast. A growing share of office supplies and clothes are bought online, yet past year e-commerce accounted for just 2% of American spending on food and drinks.
The highly competitive and saturated grocery industry has been consolidating but is still fractured. Yet sometimes the goods cost less than what Amazon pays for shipping, and that's a large cost the retailer would like to reduce.
For a grocery store chain?
Finally, Costco shoppers tend to be middle and upper middle class customers, which means they are not only looking for a good price, but also a place that offers them a lot of options. "Occasional shoppers were, on balance, more positive than negative". Smaller regional players that don't have the resources to compete would be at a big disadvantage. "Supermarkets will now have to contend with not only competition with each other and non-traditional grocers like Walmart and Target, but with a retailer like Amazon which has the financial capacity to price aggressively". That's because Wal-Mart lately has been aggressively cutting prices in response to the expansion into the U.S.by Germany's giant Aldi and Lidl discount chains.
The company has doubled the number of Neighborhood Market stores to 700 over the last three years. And now, with a pending acquisition of the Whole Foods organic chain, Amazon seems like an indomitable foe.