Online retail giant Amazon is making a bold expansion into physical stores with a $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else.
The deal had a dipping effect at the shares of other supermarkets, food producers, payment processors and shopping malls collectively of around $35 billion in United States market value on Friday as they received the news of the deal. Shares of other grocery-selling chains like Kroger, Target, Sprouts Farmers and Costco experienced a dip after the announcement.
Shopper Earlene Garvey had a carload of groceries Friday from Whole Foods but said nothing is easier than having groceries delivered from Amazon's service AmazonFresh.
Whole Foods Market started in 1978, and employees about 87000 people in its roughly 460 stores across the US, UK and Canada.
He said he expects the marketing to begin shortly after the combined company closes the deal in the second half of the year.
For Amazon, the Whole Foods acquisition does more than just leapfrog over the technical difficulties it has had in implementing its grocery plans.
"The ramifications for all of retail are seismic - not just retailers that sell grocery, but for everyone", Chuck Grom of Gordon Haskett said. To put the Whole Foods purchase price into some kind of context: Sainsbury's is now valued at £5.5bn and has over 1400 United Kingdom stores. Her daughter Bethany Capels agrees and says she likes Whole Foods for the organic fruits she can serve her kids.More news: Dad, two children dead after Father's Day after custody dispute
Amazon is considering extending the cost-cutting effort with the no-checkout technology it's developing at its Seattle convenience store, "AmazonGo", according to the person familiar with the matter, who asked not to be named because the plans are private.
Online grocery sales are expected to increase from $71 billion this year to $177 billion in 2022, according to John Blackledge, an analyst at Cowen & Co. The acquisition marks an enormous step for Amazon, moving the company from being a predominantly web-based retailer to one that operates physical stores too.
Shares in many of Amazon and Whole Foods' competitors were down in trading today, as investors contemplated the potential ramifications from the tie-up.
In May, under pressure from Jana Partners, Whole Foods replaced five board members and its chief financial officer.
While Whole Foods has struggled to expand, Amazon has been expanding its reach in goods, services, and entertainment.
For Whole Foods shareholders, the move couldn't have come at a better time.
Apparently longtime CEO John Mackey will stay the CEO and the headquarters will stay in Austin. When they take something off the shelf and put it in their cart, it registers in their account. We hope that won't be the case with this proposed acquisition of Whole Foods. This move is likely to bring more bad news for retailers who have endured many a sleepless night cursing Amazon and its influence on their business.