Amazon will pay $13.7 billion in cash to acquire Whole Foods Market, the once online-only retail behemoth announced Friday, June 16. The deal is generous, valuing Whole Foods at $42 a share, a full 27 percent higher than its closing price on Thursday. Stocks for competitors, like Kroger, Costco, and Sprouts, in contrast, all fell in the wake of the news. So what does the merger mean?
On its own, Amazon has been toying with the brick-and-mortar grocery experience for several months now, rolling out concepts like Amazon Go, which eliminates the checkout process, and AmazonFresh Pickup, the Seattle-only service that treats your groceries like takeout, available within 15 minutes of your order.
In other words, Amazon really wants you to buy your groceries (and everything else) from Amazon—and since Walmart, which already has a nationwide network of stores, just launched a giant grocery vending machine that seems destined for expansion, the time to get physical is now.
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Enter Whole Foods. Amazon’s nearly $14 billion purchase will allow Bezos’ ecommerce company direct access to hundreds of communities with income levels high enough for the regular Whole Foods customer.
Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.
And that’s just the beginning. "This is an earthquake rattling through the grocery sector as well as the retail world," Mark Hamrick, senior economic analyst at Bankrate.com, told CNBC. "We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer. Now, we can see in hindsight that its recent dithering around the brick-and-mortar experience, as an experiment, was only a rumbling of the seismic event in the offing."
Not surprisingly, Whole Foods’ price tag struck a chord with customers