Will Amazon’s Acquisition of Whole Foods Disrupt the Grocery Market
With the news that Amazon plans to buy the grocery store chain, Whole Foods, who has more than 460 stores, there is all sorts of speculation going on, such as, whether Amazon will dethrone Wal-mart in the grocery kingdom. Wal-mart has nearly 10x the footprint, not even counting Sam’s Clubs, so this doesn’t seem likely, especially given the fact that Wal-mart has expanded their “Wal-mart Grocery” order and pick up service. However, more and more consumers prefer the convenience of store-to-door services and are willing to pay an annual fee to get free or cheap shipping on items. This acquisition could be just the beginning of a new era for Amazon, who seems to be lapping up opportunities like a giant, power-hungry, Pac-man, that Trump will never be able to stop, in spite of his anti-trust concerns about Jeff Bezos and Amazon.
With this move Amazon could revolutionize Grocery delivery, but it is unclear if consumers really want that or not. There will always be a segment of the market that prefers the tactile experience of handling fruits and vegetables, setting eyes on breads and meats, smelling the various aromas and going to Costco to try all the samples! Delivery for groceries is definitely not as much of a no-brainer as electronics or other non-perishable items. In other industries such as logistics, there are companies like Freight-Tec (freight brokers), who have a unique approach to logistics, but there is also a unique need and demand for their services. Amazon, while revolutionaries in other ways, may not completely disrupt the grocery market, because there just may not be enough demand to accomplish that, although they will certainly introduce a service wanted by a good handful of consumers.
It may be that more and more of the rising generations, who have been raised in a digital world, are more open to a non-tactile grocery buying experience. If this turns out to be the case it is possible that Amazon could disrupt the industry more even than most analysts are currently speculating they will. As these generations become parents, they may also be looking for more and more ways to carve out family time in the midst of their busy lives by cutting out those exasperating trips to the store. These younger generations also tend to favor the types of groceries Whole Foods offer.
Until now Amazon’s attempts at fresh food delivery have included false starts and more like a testing ground, without huge successes or effectiveness, but this deal promises to change all that. With Amazon’s history of successes, there is no doubt that they will make the acquisition of Whole Foods, there biggest yet by a huge margin, ($13.7 billion in cash) a huge success. Only the Twitch acquisition even approached $1 billion. The questions that remain are how successful will it be and will it lead to other acquisitions in the grocery area. Will it eventually fundamentally change how most of us buy groceries or will it remain a minority (Wal-mart owns roughly 18% of the grocery market share) in the overall share of voice in the grocery market.