Amazon’s Buyout Of Whole Foods To Speed Up Its Move Into Grocery Sales
ANALYSIS: The on-line retailing giants long quest to become a major player in the grocery industry is about to come to fruition in a very big way with its proposed $13.7 billion buyout of Whole Foods
Some of Amazon’s competitors, including Best Buy and Micro-Center already have the ability to deliver online purchases almost immediately. You can buy an item from Micro-Center online, and pick it up within 18 minutes. Best Buy can take a few minutes longer, but in the case of both retailers, your purchases will be ready usually before you can get to the store.
If Amazon can do quick turnaround deliveries for groceries, it will give Whole Foods a big advantage because consumers can pick up purchases in less time than it would take to shop in the store themselves. This capability would also enable Amazon Fresh to provide a real advantage by allowing fast pickups at Whole Foods stores.
Once Amazon has all of those Whole Foods stores, there’s no reason that such pickups have to be limited to food. Amazon can also use those stores as pickup locations for non-grocery products and it can use its existing positioning software to predict what products are most likely to be useful by stocking them in a Whole Foods location, even if they’re not otherwise visible to shoppers in the store.
Amazon Grocery
There’s one other obvious benefit to Amazon, which is to provide another set of locations from which to sell its internet devices. Amazon has been setting up pop-up stores in shopping malls for a while now where you can buy a Kindle tablet, an Echo speaker or any other Amazon device. Now Amazon has more locations for electronic product sales and distribution.
Of course if Amazon just wanted to sell devices and provide a place for fast pickups, it could have just acquired Radio Shack and it would probably have cost a lot less for more locations. By buying Whole Foods, Amazon is in a position to add a core competency to its existing capabilities. This will allow the company to make a big difference in how it prices and markets food.
For both companies, this is a winning proposition. Amazon has the money and the marketing expertise that can help Whole Foods grow and it can help the grocery company become more technically savvy.
Amazon also gets a chance to learn from Whole Foods about how to run a national grocery chain. While Amazon already sells food items, it has a lot to learn about how to do it well and efficiently.
It will be interesting to see if Amazon can learn how to make money in the grocery business where profit margins are often razor thin.
Originally published on eWeek
