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.
Amazon said today it's buying the supermarket Whole Foods in a deal valued at almost $14 billion.
Amazon is already nearly dominating retail - the company's market share of the USA retail sector a year ago was estimated at 34 percent, while Walmart came second with 5 percent, according to Needham & Company's research in April.
Madeline Hurley, a grocery analyst with IBIS World, an industry research company, said Amazon will likely revamp Whole Foods' internet presence.
"We expect this transaction to further accelerate the consolidation within the supermarket space", said Mickey Chadha, senior credit officer at Moody's Investors Service.
The $42 a share offer from Amazon is a 27 percent premium over Whole Foods Market's closing stock price on Thursday. Walmart, which has the largest share of the USA food market, has been working on lowering prices, while Target has been struggling to turn around its grocery business. Analysts say the Whole Foods footprint and distribution channel could theoretically make 5-minute deliveries a reality.
Shares of Amazon were trading up 2.44% in after-hours trading.
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Whole Foods, a pioneer in organic products, as mentioned, started its business in 1978 in Austin, Texas, building its brand on healthy eating and fresh, local produce, though often with steep price points.
Amazon's philosophy has been hard on many of its retail competitors, who have closed their doors in part because of online competition. It also had announced a board shake-up and cost-cutting plan amid pressure from activist investor Jana Partners. Amazon also offers grocery shipments elsewhere, but that's tough with perishable foods.
Amazon spokesman Drew Herdener said plans do not include reducing jobs as the result of the deal and that the company does not plan to automate Whole Foods cashiers jobs with Amazon Go technology.
"This is going to have a profound effect on how convenient it will be for consumers to buy groceries", Smith said.
The worst of the fallout may have missed Casey's General Stores, Inc., because it operates more than 1,800 convenience stores, not super markets, in 14 Midwestern states that primarily are based in Iowa, Missouri and IL. But Whole Foods has lost market share to rivals Kroger Co KR.N , Wal-Mart Stores Inc WMT.N , Costco Wholesale Corp COST.O and others that have elbowed into the natural and organic segment Whole Foods pioneered. As we learned, Amazon won't change the name Whole Foods. Unlike posts, which are displayed on your blog's front page in the order they're published, pages are better suited for more timeless content that you want to be easily accessible, like your About or Contact information. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the United Kingdom could be turned into distribution hubs - not just for delivering groceries but as pickup centers for online orders. The deal is expected to close later this year.
"I like picking out my own stuff", Hall said.
JPMorgan analyst Doug Anmuth believes that the buyout would allow Amazon to be more innovative in delivering the customer buying experience in Whole Foods stores.
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