Published: Mon, June 19, 2017
Markets | By Noel Gibbs

Amazon pays £10.7 billion for grocery chain

Amazon pays £10.7 billion for grocery chain

Australian retail stocks have started the week in the red after Amazon (AMZN) unveiled a $13.7 billion bid for grocery retailer Whole Foods (WFM).

Retail shares are taking a hit. The company is still at the forefront of an ongoing megatrend, and its share of the online commerce market is only getting bigger.

Whole Foods Market has more than 460 stores and almost 100,000 employees.

"It's pharmacy. It's having the ability to put stores that are similar to Apple stores inside Whole Foods", he said. June 16, 2017 may very well be the date people look back on when the retail sector at large entered one of its most jarring transformations.

Amazon Go is the first of these ventures. The company has patented a smartphone technology that prevents consumers from online comparison shopping within the walls of a store.

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When it comes to the Whole Foods deal, though, there is little reason to fear an Amazonopoly.

It is that threat of automation that has some consumers, and many workers, worried. It is not strictly limited to food but to all groceries instead, and it simply allows for a wider selection and faster delivery time of such products than normal Amazon.

"In making these points Whole Foods is pretty rarefied and quite metropolitan, that is far from mass-market". And when it comes to labor practices, the company's CEO, John Mackey, has always been hostile to unions, but working at a Whole Foods is still a decent gig. "It's a good company", she said.

Not anymore. In one fell swoop, Amazon founder Jeff Bezos charged into the supermarket business with the $13.7 billion acquisition of Whole Foods. The chain's leadership will stay on and the company will continue to operate out of Austin while keeping its current name and branding. It wasn't successful and the company retreated almost five years ago.

Critics of Amazon, however, are not feeling optimistic about this multi-billion transaction.

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With top line growth outpacing the overall growth of online sales, it's clear Amazon is grabbing market share even as the market leader.

"Amazon's acquisition of Whole Foods raises significant anti-competitive issues that should be deeply concerning to federal antitrust regulators and the public". The technology lets people pay with smartphones without seeing a cashier or going to a checkout kiosk, which would help Amazon differentiate itself in the brick-and-mortar setting and reduce labor costs at Whole Foods stores. "Regulators should block this acquisition". "It's more choice, more competition and cheaper stuff".

A survey conducted by research firm InfoScout also indicated that consumers in Lidl's debut states are now shopping for groceries at Wal-Mart, and 90 percent of those customers are likely to give the new stores a try. If the Trump Administration, whose leader and aides have long seen Bezos as an adversary, decides to fight this deal they might gain some traction.

A year and a month later, Amazon introduced its version of a friction-less physical shopping experience called Amazon Go which leveraged technology and AI to make waiting in queues redundant. In our view, an online-only operation would also have suffered from perilously low margins and would have damaged Amazon's profitability as it scaled up. If the "automated retail location" idea is popular and takes off, it will result in the loss of millions of jobs in retail locations across the board, not just in grocery stores. He benefited in 2013 when a United States court ruled that Apple and the top five U.S. publishers had conspired over ebook prices to the detriment of Amazon and the consumer.

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