Amazon shook up the grocery scene on Friday when they announced their acquisition of Whole Foods for $13.7 billion dollars. While the company had already been experimenting with brick and mortar through their opening of several bookstores, their acquisition of Whole Foods has opened a variety of possibilities with how they can use their new physical presence.
This may mean big changes for the Seattle-based giant but bigger question is how will it affect the grocery industry.
Big market players Walmart and Kroger now hold 25% and 8% of the US grocery market respectively and have already been poising themselves to deliver more technologically friendly grocery services in anticipation of competitors’ expansion into their space. Other companies that offer services such as grocery delivery and meal preparation are keeping a close eye on Amazon as they become unsure of their own futures.
Traditionally, grocery stores are known for their considerable waste of perishable products, thin margins and bulky frameworks. Consumer are beginning to develop a greater taste for seamless and convenient purchasing which has been largely missing from the grocery market. In addition, product reviews and ratings have also been absent from the grocery aisles. These features are items that Amazon can bring to the table as they are already leaders in the data domain.
While the effects of this new acquisition may seem daunting and disruptive, it is a notable step towards the integration of digital and physical that has been the topic of conversation over the past few years.
The acquisition of Whole Foods puts the company on the turf of many of their existing customers, and for Amazon it makes a great deal of sense. CEO John Mackey started Whole Foods with the mantra of delivering organic and high quality foods to the public. While it’s still uncertain how much repositioning Amazon will conduct for the store; we are also left with the prospect of a greater number of higher quality products at more accessible levels. This could translate into a significant change in options at the consumer level.
Leading this change is Jeff Bezos and the executive team at Amazon, who have dreams of stores that can run themselves and service that is instantaneous. While the ideas of grocery stores with no human staff or home-drone delivery may seem far-fetched, they are already piloting some of these ideas in an “Amazon Go” store in Seattle. As they continue down their path of marrying technology, convenience and now the physical retail experience, it leads all to wonder what retail will look like in five or even ten years. Likely, the market is headed towards a convergence of companies through a series of mergers and acquisitions that will lead to a handful of retail giants battling it out over service and convenience.
As for the traditional grocers, if they can’t keep up with technological advancements from competitors such as Amazon, they may need to “checkout” of the market.