Amazon & Whole Foods Market deliver a big surprise

The announcement last Friday that Amazon is to acquire Whole Foods Market for USD 13.7bn appears to have taken many people by surprise, especially given that Amazon has become the world’s biggest retailer (by market capitalisation) by shunning the traditional bricks and mortar retail strategy and has historically stayed focused on its online and ecommerce business model.

There has been speculation since late in 2016 that Whole Foods was exploring its strategic opportunities, but the company had so far been linked to more traditional retailers such as The Kroger Company and Albertsons.

Since its 1994 launch as an online book store, Jeff Bezo’s Amazon has continually evolved its offering, enabling its customers to pretty much buy anything they might need online. The company has used technology to the maximum, introducing Amazon Prime initially to offer its customers two-day shipping, but then expanding this service to include free streaming of music, TV and movies.  It seemed a natural next step when in late 2016 Amazon launched Amazon Fresh, its online grocery delivery service. Users could purchase pretty much anything else they needed via Amazon, so why not food?

This deal is so fascinating because via its acquisition of Whole Foods Market, Amazon gets access to over 400 high-end organic supermarkets, i.e. physical retail outlets, something that it has previously avoided. Having massively changed the world of broader consumer retailing, I’m sure the traditional grocery retail chains, both in the US and elsewhere, will be watching this deal with interest and some trepidation.