Online retailer Amazon is set to purchase organic food specialist Whole Foods for $13.7 billion as the e-commerce giant delves deeper into the grocery retail sector.
With Amazon already operating online grocery store AmazonFresh, this deal, which includes Whole Foods’ 465 stores across North America and the UK, looks set to aid Amazon in expanding its rapidly growing grocery service.
It follows reports in the US last year that Amazon would open brick-and-mortar convenience stores, dubbed Amazon Go, in order to build on AmazonFresh.
Whole Foods co-founder and chief executive John Mackey, who will stay on in his current role, said: “This partnership presents an opportunity to maximise value for Whole Foods Market’s shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers.”
The deal is likely to be a good investment, given the state of the online grocery market. Nearly one in five consumers said they were extremely likely to make an online grocery purchase in the next year, and another 26% said they’re somewhat likely to do so, according to data from Walker Sands.
When you consider that 84% of consumers made a purchase on Amazon in the past year, many of which are also using grocery-focused services such as Amazon Pantry (14%) and AmazonFresh (10%), this acquisition of a trusted grocery partner could place Amazon as the clear market leader in e-grocery.
The takeover is expected to be completed later this year.
By Hugh Fletcher, global head of consultancy and innovation for e-commerce specialists Salmon
This deal is a clear signal of intent from Amazon to dive deeper into the grocery sector. Amazon Fresh and Amazon Go were the first steps, but this shows the e-commerce player is no longer treating grocery as just another branch in its huge eco-system. While the supply-chain logistics and overall operations will be complicated, there is no hiding the fact that Amazon is striving to own the entire retail sector. It’s evident that there is also a growing importance on a robust omnichannel strategy, for both pure play and traditional retailers, and the deal underlines Amazon’s approach to grow its business across online and offline channels.
Amazon’s newest move positions it to thrive and is designed to successfully beat competitors to the punch in grocery. The partnership also presents an opportunity to maximise Whole Food’s vast market share in the US and will no doubt enable it to digitally transform into the future.
Amazon is now very loudly expanding its offering beyond retail to own every single instance of the customer experience – this feeds into Interface Imperialism, where brands diversify and expand their offering into entirely new services. Digital assistants and voice interfaces may well be the future of shopping – the rise of Amazon Echo, Google Home and Apple HomePod certainly suggests so – and Amazon will look to link their new grocery function up with Alexa.
As it shows no signs of slowing, and as we shift into a ‘screenless’ society, retailers will have to transform their offering to meet shoppers’ evolving traits. It remains to be seen whether Amazon Echo is just another fad, but what is clear is that, one way or another, Amazon is currently setting the benchmark in retail and competitors better watch out.
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