E-commerce giant Amazon shocked consumers nationwide (and the food and beverage public relations team at Konnect!) when on June 16th they announced that they would be acquiring Whole Foods Market in a cash transaction valued at nearly $13.7 billion.
Amazon has been in the grocery space since mid-2007 when they first launched the beta version of their subsidiary grocery delivery service, AmazonFresh. AmazonFresh has since rolled out services to key markets gradually, launching in Los Angeles in 2013 and eventually expanding to serve American consumers in New York, Pennsylvania, Maryland, Massachusetts, Illinois, Texas and Colorado. The service also made a recent international expansion to serve Tokyo, Berlin and London.
So what does this newly-announced merger mean for the future of AmazonFresh and the future of the grocery industry in general? Well, megaretailer Wal-Mart was initially concerned that this move might affect Wal-Mart’s current position as the world’s biggest retailer and grocer. According to Moody’s analyst Charles O’Shea, though, Wal-Mart will continue to fare remarkably well despite Amazon’s growth.
O Shea’s response is founded on the idea that Amazon is not the only company making innovative upgrades to their services; Wal-Mart also has a successful subsidiary grocery service with Walmart Grocery that—like Amazon— offers ultra-convenient same-day delivery. And even with the acquisition of 460 Whole Foods stores, Wal-Mart continues to have a significantly larger bricks-and-mortar presence with 5,300 physical locations. Most Americans have a Wal-Mart located within a 10-mile radius of their homes and that’s hard to beat.
That being said, traditional retail chains still saw a major drop in stock prices in the wake of the announcement showing that investors are uncertain of the future. Will Oremus, a writer for Slate, tweeted a screen grab from CNBC’s coverage of the merger showing that Kroger’s stock price had dropped a staggering 15%. The caption of his Tweet read, “Rough morning for grocery companies not named Whole Foods.”
What does the future hold for Amazon, the company that has revolutionized how Americans view e-commerce? Only time can tell, but if they continue their impressive year-to-year growth and experience success with this critical move into the grocery space, perhaps talk of Amazon monopolizing retail is not so far-fetched.