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Convenience Store News: Amazon Buys Whole Foods Market

Convenience Store News: Amazon Buys Whole Foods Market

Unless you’ve been living under a rock for the last week, you heard the news that online retail giant Amazon recently reached a deal to acquire the healthy grocery giant Whole Foods for approximately $13.7 billion.

The move sent shockwave through the online retail and grocery industries as some analysts praise the move while others are left scratching their heads. Here’s a breakdown of both sides, as well as what it might mean for you, the c-store owner:

What’s Good For Amazon

We know that Amazon has been testing a new c-store model, Amazon Go. This unmanned store allows customers to get in, grab their items, and go without waiting in line or paying at the register. While the concept is still a few years off in terms of implementation; it may have just been given a fast track by Amazon choosing to get their feet when in the offline grocery game.

Amazon has further been testing AmazonFresh, a grocery delivery service currently available in some U.S. states as well as Tokyo, Berlin, and parts of London. This same (or next) day delivery service has been quietly building up momentum. Now it may be off to the races.

 

The acquisition of Whole Foods gives the online retailer a foothold with 431 brick and mortar locations that can serve as distribution channels for their grocery activities. Amazon has been tight-lipped about their intentions after the sale, however it would be hard to imagine that acquisition of Whole Foods means that Amazon Go and AmazonFresh has been scrapped entirely.

It is likely that this means a green light to one, or both concepts; likely AmazonFresh. With 431 physical grocery locations Amazon can now expand their grocery delivery service to literally dozens of new markets, and relatively quickly. AmazonFresh has been steadily incorporating organic and healthy products to their line which fits in nicely with the core concept of Whole Foods.

 

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What’s Bad for Amazon

Amazon maintains a strong position (approx. 1/3 of all US online sales) due in part to their ability to offer a variety of items at an attractive price point. Customers are enticed further by the offer of free shipping with Amazon Prime.

For their part, Whole Foods is a luxury brand grocery store that operates on thin margins and has come under fire recently for underperforming. There may be a steep learning curve for Amazon as they look to navigate the waters from what is essentially an online discount warehouse to organic, high-end grocery products.

Per John Olsen, a technology analyst for financial services giant, Edward Jones:

“Food is the one thing Amazon hasn’t been able to figure out…They’ve tried out all these different concepts, and the question was always: Would going all-in mean getting into the bricks-and-mortar business?”

The real question remains how Amazon is going to merge these two concepts, or if that’s even the goal at all. For the most part, Whole Foods’ executive leadership will remain intact, but it’s hard to imagine Amazon, a company whose every move seems focused on long-term growth, doesn’t have a plan.

What It Means For You

There will certainly be a learning curve for Amazon, and whatever their plans are; nothing will happen overnight. The sale is still pending approval of shareholders (who will most certainly approve the move) as well as regulatory sign-off.

However, it is obvious that Amazon is focused on continuing its foray into the grocery market and it’s more of a question of “when” not “if” they will make strides to radically change the industry. Whether that comes in the form of Amazon Go’s unmanned c-store or AmazonFresh offering same-day grocery delivery to millions; things are going to change.

For smaller c-store owners, keeping up with Amazon is a subject we’ve covered in the past. Now is a good time to revisit your business model and identify areas where improvement may help streamline your processes and boost revenue and profitability. [Want us to help you with that? Schedule a Free Demo today.]

Whether that’s implementing new inventory management software to control your margins better, promoting a new loyalty program, or becoming more active in your community; Amazon isn’t going away and neither should you.

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