Amazon purchases Whole Foods Market for $13.7 billion
Amazon, an American e-commerce and cloud computing company, largely owes its success to its vast outreach in various markets. Amazon engages in everything from selling nearly every type of good to developing its own products and services, like the Amazon Kindle, Amazon Web Services and Amazon Echo.
The Amazon Echo, a voice-enabled wireless speaker, has gained mass appeal for its useful applications, such as allowing users to ask it to report current events and the weather or play music.
Amazon also provides a popular service called Amazon Prime. Prime offers subscribers free two-day shipping on many products sold on its website.
Recently, Amazon has tried to break into the grocery industry. In Manhattan, the company teamed up with stores such as Billy’s Bakery, D’Agostino and Gourmet Garage to include one-hour grocery delivery.
The largest breakthrough it has made in this area, however, is its $13.7 billion acquisition of the high-end organic grocery chain Whole Foods. Analysts and investors have claimed that this acquisition could fundamentally change the supermarket industry and how customers order groceries online.
An acquisition of this size, however, was deliberated heavily by the Federal Trade Commission, Whole Foods’ executive board and shareholders. The main issue that the FTC had concerning the deal was how it would impact other companies’ competition with Amazon. FTC eventually decided that the deal was fair because Amazon is not a direct competitor to Whole Foods so their combination would not lead to a potential monopoly.
Whole Foods agreed to the deal with Amazon because its shareholders believed that the acquisition would improve its position in a competitive grocer market. At first, Whole Foods was seen as the go-to store for organic, ethically grown produce. Other grocery stores recognized how lucrative Whole Foods’ niche was and copied it, selling similar organic produce for cheaper prices.
Amazon has stated that it will lower the prices of groceries at Whole Foods, which will help the chain compete better in the organic food market.
“Everybody should be able to eat Whole Foods Market quality—we will lower prices without compromising Whole Foods Market’s long-held commitment to the highest standards,” stated Jeff Wilke, CEO of Amazon Worldwide Consumer.
The prices will first be lowered on popular, staple food items. In the future, more goods will have their prices lowered and dicounts will be offered to Amazon Prime members.
Erica Bowman, a junior at Baruch College, approved of the acquisition deal, saying, “If I can get Whole Foods brownies at a discount with my Amazon Prime account, then that’s a great thing.”
This deal also gives Amazon access to Whole Foods’ brick and mortar stores, where it can sell produce and deliver groceries.
Lamoy Norman, senior, said, “I love it, because books that I order on Amazon can now be picked up at Whole Foods, where I can go shopping afterward.”
Competitors are responding by adding online shopping options to their respective businesses. Walmart has recently partnered with Google to increase its internet presence. Thousands of Walmart’s goods will soon be available for purchase on Google Express, Google’s e-commerce platform.
This is the first time that Walmart’s products will be available in the United States on a website that is not its own.
Google and Walmart also want to capitalize on what they see as the future of online grocery shopping. Their idea is that voice-based shopping has potential. Google Home, a voice-enabled smart speaker that rivals Amazon Echo, and Google Assistant, an artificial intelligence software available on Android, will facilitate more convenient shopping for consumers.
According to The New York Times, Google believes that since “more than 20 percent of searches conducted on smartphones are done by voice, it expects voice based shopping to not be far behind.”
Additionally, the partnership will lend Google’s tech to Walmart’s website, giving buyers more options. Walmart customers will be able to link their shopping accounts to Google, and Google will use its past shopping behavior to predict what customers may want in the future.
Walmart is also adding a grocery section to its website, which will allow consumers to order produce online and pick it up in-store.
To incentivize customers, those who use the service will receive a discount on certain items. This is also beneficial for Walmart, as they can avoid shipping costs that would come with the home delivery of groceries.
Additionally, Walmart is testing a cheaper home delivery service with Uber. In order to be eligible for home delivery, a customer has to have a minimum purchase of $30 and pay an additional delivery fee of approximately $10.