Amazon moves into real-world stores with $13.7 billion Whole Foods deal

Amazon moves into real-world stores with $13.7 billion Whole Foods deal

It will continue to operate stores under its own brand and source products from vendors and partners. Kroger, the nation's biggest supermarket chain, had earlier warned Wall Street of disappointing earnings. The Journal estimated that the Amazon announcement had wiped almost $29 billion from the aggregate market cap of rivals in the grocery category.

A Whole Foods Market is pictured in the Manhattan borough of New York City, New York, U.S. June 16, 2017. "It is a tsunami that will shake up and change grocery retailing". Those stores would solve much of Amazon's "last-mile" delivery challenge for fresh groceries - perhaps the top reason it hasn't made a dent in the grocery shopping of the 60 percent of millennials who buy other items from Amazon, he said. Amazon's move aims at the heart of the Bentonville, Arkansas-based retail giant's business - groceries, which account for 56 percent of Wal-Mart's $486 billion in revenue for the year ending January 31.

"I think that they are a very profit-driven company, so there might be some streamlining as far as labour", said Sasha Hardin, 28, of the Mount Pleasant store, who has been with Whole Foods for 6-1/2 years.

Whole Foods has posted seven straight quarterly sales declines at established stores and recently overhauled its board of directors in the face of pressure from activist hedge fund Jana Partners LLC.

Groceries are already a fiercely competitive business, with low-priced rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first USA stores just this week.

"Dominant players like Walmart, Kroger, Costco and Target now have to look over their shoulders at the Amazon train coming down the tracks", said Moody's lead retail analyst Charlie O'Shea.

Whole Foods sent a letter to customers after the merger announcement, calling the agreement a new chapter in Whole Foods' history and an incredible opportunity.

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. Every retailer in the market that competes with Whole Foods is going to have to offer their customers similar experience not just in product selection but in availability and timeliness.

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Both companies have a significant presence in Texas, making the Lone Star State a good place to test synergy, according to one marketing expert. The Whole Foods purchase may help it resolve that issue.

Amazon is the world's largest online retailer by sales.

For now, though, Whole Foods cashiers and other employees can take a sigh of relief.

With the Whole Foods acquisition, analysts anticipate that Amazon will be the third largest retail grocery, behind Wal-Mart and Kroger, by 2021.

Amazon could also get a better picture of customers by marrying data from Amazon and Whole Foods' loyalty programs.

"It's too soon to say if we would reconsider or change anything" about the relationship with Amazon Prime Now, Hardy said.

"Amazon could bring technology to all Whole Foods locations, or it could absorb Whole Foods into AmazonFresh". The deal still has to get approved by shareholders and regulators. The grocery giants like Walmart, however, have so far managed to maintain their edge of having more stores nationwide, swiftly penetrating e-commerce, and establishing grocery pickup at many of those stores.

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