What are the implications of Amazon’s shock purchase of grocery chain Whole Foods?
“Owning Whole Foods and a relationship with high-frequency customer engagements will be transformative.
“The opportunity to both serve existing customers remotely, and new customers with access to a store is important. But so too is the broader possibility of consolidating food with non-food deliveries and its positive impact on fulfilment economics. How will any other retailer match Amazon’s fulfilment service without damaging its own economics?
”A more subtle message from this deal is around physical shopping and the often asked question: does the store have a future? Well clearly Amazon thinks so, and they have been the number suspect behind the death of shops. A vote of confidence from what might have been thought the most unlikely source.
“Food is the largest retail market, and next comes fashion. Like food, really successful selling of clothing requires a totally different approach to Amazon’s traditional model. How long before some strategic fashion acquisitions accelerate Amazon’s takeover of clothing too?”
Richard Hyman, RAH Advisory
“Today’s news is in some ways a tacit admission from Amazon that food retail is incredibly difficult as a purely online player. Online grocery shopping has grown rapidly and may seem quite well established, but it is still a fairly niche option for food shopping.
“Amazon is committed to cracking the grocery market, and a business like Whole Foods brings with it many of the crucial ingredients the ecommerce giant has been missing in its other forays into food and drink.
“The power of a physical presence on the high street to grow a brand’s reputation and credibility is particularly important in grocery, where consumers want to be able to see the quality of the items they’re buying first hand.
“Bricks and mortar stores will also allow Amazon to expand its options for ordering, pick-up and delivery.
“More broadly, as a well-established retailer focused on the lucrative health and wellness market within grocery, Whole Foods is perfectly positioned to give Amazon a crash course in how food retailing really works on the ground.”
Fraser McKevitt, Kantar Worldpanel
“Despite first impressions, this deal won’t be all about developing a bricks and mortar format.
“Perhaps more significantly, Amazon will acquire 400-plus prime location distribution hubs in the US which will enable it to expand its online food offering at pace.
“Amazon is likely to be considering that its Go and Pantry offering, coupled with Whole Foods’ USP of fresh healthy food, will allow it to be the leading grocery retailer for convenience and health, which is the way the grocery market is moving.”
Andy Brian, Gordons
“It’s evident that there is a growing importance on a robust omnichannel strategy, for both pureplay and traditional retailers, and the deal underlines Amazon’s approach to grow its business across online and offline channels.
“Amazon is now very loudly expanding its offering beyond retail to own every single instance of the customer experience – this feeds into ‘interface imperialism’, where brands diversify and expand their offering into entirely new services.
Hugh Fletcher, Salmon
”Amazon is leveraging what others like Target and Walmart have already figured out - that grocery is one of the highest frequency purchase categories in retail.
“This move raises a serious red flag for all retailers down the road - once Amazon wins the high frequency purchase, they are likely to win other purchases - from blenders to lamps to shirts - due to convenience buying.
”The market should take note that this is just the beginning for Amazon - it’s the 1st inning of a game that has a long way to go.”
Brendan Witcher, Forrester
“This deal is another example of the increasing blurring of lines that is happening between the online and offline retail worlds. Shopping is now becoming seamless: it’s about obtaining goods whether online or offline, through clicks or bricks, via multi or omnichannel, it is now simply ‘commerce’.
”In other areas of retail, an element of experience can be thrown in to the mix to attract customers away from their sofas, but grocery shopping has almost always been won through convenience.
”The deal marks a step up from recent announcements such as the Morrisons fulfilment deal and could set a precedent for other similar deals across the grocery sector.”
Tim Vallance, JLL
“This is the clearest indication that Amazon intends to be a serious player in grocery retail - and is a significant wake-up call for grocery retailers in the North America and the UK.
“It also highlights that Amazon clearly believes that in order to achieve long-term success in the grocery category, it is essential to have a bricks-and-mortar presence.
“It is widely known that Amazon has been scouting for prime-Central London locations as part of its move into grocery retail in the UK. Exactly 12 months since the launch of Amazon Fresh in the UK, and in one fell-swoop, the online giant will now have nine supermarkets in the UK – seven of which are London-based.
“Whole Foods’ proposition also has an excellent fit with the typical London-based Amazon Prime Customer. The UK grocers have downplayed Amazon’s impact on their sector to date, but this latest move should have them genuinely looking over their shoulder.”
Harsha Wickremasinghe, Livingstone
“Amazon’s announcement this morning that it had agreed to acquire Whole Foods Markets for around $14bn is a transformative transaction, not just for food retail, but for retail in general.
“Implications ripple far beyond the food segment, where dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks, but also the potential for multichannel, which Amazon up until now has largely eschewed.”
Charlie O’Shea, Moody’s
“Having a physical presence, closer to the customer, provides the potential to reduce delivery lead times and last mile delivery costs.
“There will also be a strong cross-over between Whole Foods Market’s core customer group and Amazon’s Prime members, which are typically younger and more affluent. This deal provides the opportunity for significant buying synergies and to expand the Amazon Fresh model.
“There is also a great opportunity for Whole Foods Market to optimise Amazon’s technology, particularly the work it has started around developing a checkout free store environment, and its focus on creating a frictionless customer experience.”
Stewart Samuel, IGD
“Amazon’s purchase of Whole Foods makes sense for a number of reasons, not least because they have clear intentions of moving into the grocery market and the fact that consumers are increasingly moving towards online shopping across a number of different retail categories, including grocery and eat-at-home.
“Amazon has a large distribution network. It also has an incredible wealth of understanding about how consumers shop online, and their expectations of the online shopping experience – from browsing and shopping through to payment and delivery.
“It will be interesting to see how Amazon drives growth from a relatively niche and premium brand such as Whole Foods.”
Jason Juden, TLT