The online shopping conglomerate Amazon has agreed to a $13.4 billion purchase of the American upscale grocery chain Whole Foods, which marks a huge step in Amazon’s investment into the food shopping sector. The industry is worth $700 to $800 billion in the United States, and Amazon’s biggest opponent, Wal-Mart, already has a huge participation in that field. Amazon has recently been interested in getting a foot in the brick-and-mortar department, building outlet stores as well as developing AmazonFresh, a food delivery service. “The Whole Foods acquisition provides them more physical locations. They’re going to be within an hour or 30 minutes of as many people as possible,” observed Mikey Vu of the Bain & Company retail consulting firm.
As for Whole Foods, this moves comes after an extended period of stagnancy in stock price. In reaction to that sluggishness, Whole Foods overhauled its board of executives last month, replacing five directors and hiring a new chief financial officer. With the addition of Amazon’s support, Whole Foods will get a much-needed boost in technological infrastructure. For example, Amazon has already experimented in the past with a cashier-less convenience store, something that could serve its relationship with Whole Foods in the future. Additionally, Amazon built two drive thru grocery pickup depots in Seattle, Washington as an experiment into online grocery shopping. While these possibilities are on the table, Amazon representatives assured that there are no immediate plans to automate the chain or make mass job reductions upon the purchase’s finalization.
After the deal was announced, Amazon shares rose by 3.3 percent, while Wal-Mart, Target and Costco stock dropped quickly. Whole Foods is known for its higher-than-average prices, spurred by its focus on organic and fresh produce. Because of the niche target, bigger retailers like Wal-Mart and Costco, which have added produce to their inventory, were forcing Whole Foods to take cost cutting measures to keep up.