Amazon and Whole Foods : A Power Duo for the Grocery Market

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Amazon has acquired to buy the powerhouse grocery chain Whole Foods for 13.7 billion dollars. This is a big move for Amazon and their transition into the grocery industry. Amazon’s goal has been to merge into the grocery market ever since it created an online grocery store called “Amazon Fresh”, which offers groceries ranging from vegetables and dairy products to household items and prepared foods.

Once Amazon acquired Whole Foods, the online retail store gained access to the in-store grocery market, which can potentially change the entire concept of grocery shopping for customers and competitors. Amazon raised some eyebrows when it announced this acquisition with Whole Foods mainly because Amazon is known for pricing its products for an affordable market, compared to Whole Foods who retails their goods on the pricier side.

When an untraditional grocer like Amazon is added to the mix of traditional grocers, competition becomes steep. Competitors are being challenged to keep up with the online benefits that Amazon has to offer in order to keep their customers satisfied. Among these competitors are Target, Costco, Sprouts Farmers Market and Supervalu.

After Amazon announced its plan with Whole Foods on Friday, these competitors’ stocks hit just above their lowest levels. Meanwhile, Amazon’s and Whole Foods’ stocks rose. USA Today reported “Shares of Amazon rallied 2.4%. Whole Foods Market, which has more than 420 stores in more than 40 states in the U.S., soared more than 29.1% to $42.68.”  The rise in Amazon and Whole Foods stocks show the threat competitors will face and how this deal shook the grocery market.

MarketWatch reported on the changes that Amazon will bring to the Whole Foods market, “Amazon will bring along with it competitive prices to lure shoppers who may have otherwise strayed away from Whole Foods because of how expensive it could be.” Amazon and Whole Foods combining their prices will bring forward a range of new customers, which could result in a power duo for the grocery market.

Why Whole Foods?

Whole Foods has its own brand of food products, “365 Value” which is what pushed Amazon to acquire the chain and test the limits of online grocery shopping. Amazon will combine their own brand, “Amazonbasics” found on Amazon.com, which offers basic needs such as batteries, chargers and pet supplies with 365 Value line which is exclusive and extensive, providing customers with a variety of food products that are unique to the Whole Foods brand. This line was recently integrated into a chain of stores that specifically only sold the 365 Value brand, and is also accessible online by ordering from WholeFoodsMarket.com.

The fact that both retailers have dominated their specific market spaces by offering their own line of goods, influences the way food manufacturers and producers play a role in this transaction as well. Since Amazon and Whole Foods could run operations entirely on their own manufacturing causes a potential threat to manufacturers and producers in the grocery industry.

Since Amazon is driven by technology, online sales and technology is cheaper than paying workers, will this change the common grocery store theme that customers are accustomed to? Integrating technology into grocery stores is simply going to make things efficient, quick and convenient by eliminating waiting on line to check out of the store.

Amazon has already tested this theory, with “just walk out” technology that has emerged in a pop-up store in Seattle. This store launched half a year ago and gave consumers and competitors a glimpse into the goals that Amazon has while integrating technology into the grocery market. The “just walk out” concept offers a new way to check out while grocery shopping using high-tech sensors, that eliminates employees checking out groceries altogether.

This is not the first time Amazon has experimented with technology. Amazon has emerged in the technology industry by creating a variety of advances that has further lead their acquisition into the grocery market as well. These technologies include Amazon Prime, Amazon Fire Phone, and Amazon Fire Tv.

With all the buzz surrounding Amazon acquiring Whole Foods for such a large price, many people are asking: why did Amazon choose to make this move? The answer is simple, with a few components.

Amazon is not just buying a retailer, it is buying everything Whole Foods brings to the table. It is buying the loyal customer, the product line and the brand that represents the chain. All of these attributes will put Amazon in a place that benefits its acquisitions into the grocery world, expanding its online space and changing the way customers view grocery shopping forever.

Let’s face it, whether you like it or not, grocery shopping is a routine that is ingrained in most people’s lives. Amazon acknowledges the digital change that is shifting in most industries and is making moves to stand at the forefront of these changes in the grocery industry. Amazon wants to dominate the grocery market, and a deal with Whole Foods makes that a whole lot easier.

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