Amazon to Acquire Whole Foods, Expand Brick-and-Mortar Footprint

  • Amazon to Acquire Whole Foods, Expand Brick-and-Mortar Footprint

Amazon to Acquire Whole Foods, Expand Brick-and-Mortar Footprint

It's not unusual for Amazon to report almost zero in net income in quarter after quarter as the company plows money into developing new businesses, whether it's producing original TV shows or building artificially intelligent speakers. For Amazon, they have made a dramatic step into brick and mortar, which will catapult the e-commerce giant into hundreds of physical stores and fulfill a long-held goal of selling more groceries.

Wal-Mart had an obvious impact on consumers and competitors, but the real Wal-Mart effect of Fishman's title was that of tiny increments multiplied millions and billions of times.

Data source: Company quarterly earnings report and company facts page. Will there be enough of these jobs to go around for those put out of work in the retail sectors or will those new jobs require a skill set that the retail workers won't have? The company's been on a hiring spree lately, with its employee count growing 43% year over year in the first quarter.

Amazon.com can ship books, furniture and clothing across the Pacific Ocean in what seems like a blink of an eye.

And grocery may take a middle path, says Kimberly Scott, a portfolio manager at the Ivy Mid Cap Growth Fund, which counts Whole Foods stock as one of its biggest investments.

Amazon has plenty of time to change its strategy, however, with the $13.7 billion deal not expected to close until the second half of the year.

It's a natural progression for Amazon, said Brendan Witcher, a retail analyst at Forrester. More than half of USA households with income over $100,000 a year are already Prime subscribers.

Amazon's proposed takeover is also unlikely to alter its Australian expansion plans, the experts say, although the offer does demonstrate that the future of retail is bricks and mortar plus online. Clark says capacity in eighth-generation warehouses is 50% greater than the previous generation.

Peter Belanger of Newington, Connecticut, who was shopping at a Whole Foods in West Hartford, said he didn't think he'd be interested in groceries online.

Amazon's brick-and-mortar foray into a difficult-to-deliver category such as fresh groceries can easily translate to the furniture industry, where final delivery of online purchase can be complex and expensive to fulfill, said Manoj Nigam, CEO of MicroD, a home furnishings digital technology company.

Amazon and Whole Foods declined to comment for this article.

Alexander Pease, chief financial officer of pretzel maker Snyder's-Lance Inc., said at a conference last week that the deal would generate another "level of discussion with [retailers] around price". 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 also as pickup centers for online orders. Cashiers are not expected to be affected, but distributors' labor will be automated. Wedbush Securities analyst Michael Pachter said Amazon might get customers over those fears if they know the delivered items are the same as those they would find at the local store. That would enable staff to walk around and help customers more, or slash jobs, as was rumored over the weekend following the deal announcement.

By acquiring Whole Foods, Amazon is buying not just an established, upscale supermarket brand, but also a vast distribution network of warehouses and more than 460 stores worldwide - replete with back rooms and cold storage - in some of the most affluent ZIP codes in America. Analysts and former employees expect the company to use Whole Foods to build out its own labels and capitalize on the grocer's success with its 365 brand, which accounted for 15% of its most recent fiscal year's sales. However, there's a risk that an efficiency-driven Whole Foods might not prioritize health, social and environmental values as it has in the past.

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. Kroger's stock has just been crushed in the past week. That's right - they think these 10 stocks are even better buys. But while the online retailer has arguably perfected the art of putting dry goods on customers' doorsteps, it has struggled to do the same with fresh food. Adam Levy owns shares of Amazon. Amazon benefits from this, and now that it has Whole Foods it can take the company into another progressive direction.