Amazon is to buy Whole Foods Market for $13.7bn (£10.7bn), an acquisition that will give it a significant number of UK stores and gives it a base from which to challenge the dominance of supermarkets in this country.
The US-based organic foods specialist has nine UK stores, including seven in London and one each in Cheltenham and Glasgow.
Amazon says Whole Foods Market will continue to do what it does best under its ownership. “Millions of people love Whole Foods Market because they offer the best natural and organic foods and they make it fun to eat healthy,” said Jeff Bezos, Amazon founder and chief executive. “Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue.”
John Mackey, Whole Foods’ chief executive and co-founder, said the tie-up would also improve the Whole Foods customer experience. “This partnership presents an opportunity to maximise value for Whole Foods Market’s shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers,” he said.
The deal, which is subject to shareholder and regulatory approval, is expected to complete in the second half of 2017.
Commentators see a move by Amazon as a way of strengthening its position in the UK grocery sector. Rupal Karia, head of commercial, UK and Ireland, at Fujitsu, points to its recent Forgotten Shop Floor study in which it found that 75% of UK shoppers said they would go to Amazon if it had stores.
“This move by Amazon to buy Whole Foods is just the latest in its ongoing diversification and strengthening of its plethora of services,” said Karia. “Amazon already has its Amazon Fresh arm, and this acquisition will only strengthen its arsenal and solidify its place in the grocery sector. Although Amazon is predominantly an online first retailer, this deal is clearly testament to the fact that shoppers still want a physical experience with retailers, and this caters perfectly to that. It is also a shrewd move from Amazon to acquire a well-respected grocer with a strong physical presence and loyalty base already, as it means they will already have a strong customer following, but it’ll be interesting to see how they move the brand forward into the digital age.
“As consumers want to be able to shop with flexibility – sometimes online, sometimes in-store – and expect the experience to be seamless regardless of the channel they choose, this new deal caters to that need, marrying Amazon’s online expertise with Whole Foods’ physical presence. This is where retailers need to find ways to match it and ensure they are differentiating themselves from their competitors.”
David Jinks, head of consumer research at online parcel service ParcelHero, says the deal gives Amazon an opportunity to expand the cashierless Amazon Go store (pictured) that it has already trialled in Seattle in the US.
“A chain of automated Whole Foods stores, in the US and here in the UK, might prove attractive to busy younger shoppers, hard pressed for time but interested in eating healthily; which would complement the online business,” he said, adding that Amazon would likely expand Whole Foods’ business online.
Hugh Fletcher, global head of consultancy and innovation at Salmon [IRDX VSMN], said: “This deal is a clear signal of intent from Amazon to dive deeper into the grocery sector. Amazon Fresh and Amazon Go were the first steps, but this shows the ecommerce player is no longer treating grocery as just another branch in its huge eco-system.
“While the supply-chain logistics and overall operations will be complicated, there is no hiding the fact that Amazon is striving to own the entire retail sector. It’s evident that there is also a growing importance on a robust omnichannel strategy, for both pure play and traditional retailers, and the deal underlines Amazon’s approach to grow its business across online and offline channels. Amazon’s newest move positions it to thrive and is designed to successfully beat competitors to the punch in grocery. The partnership also presents an opportunity to maximise Whole Foods’ vast market share in the US and will no doubt enable it to digitally transform into the future.”
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