Amazon’s Acquisition of Whole Foods – Return of the Milkman?

 

Just when you thought the good old days of daily delivery from the milkman and fresh bread brought to the doorstep was becoming a story from your grandparent’s past, Amazon’s quest to be everyone’s grocery store may well, in some sense, make that a reality again.

On Friday, Amazon dominated pre-weekend headlines by announcing its plan to acquire supermarket chain Whole Foods Inc. for $42 a share, a cash value of $13.7 billion. But in trading Monday, Whole Foods closed at $43.22 a share — up 54 cents on the day — indicating investors may expect a higher offer this week.

While the adoption of online grocery has been, by some measures, slow to catch on, Amazon’s strategic move to add Whole Foods to their portfolio has brought the transformation of the industry to the forefront.

It’s generally recognized that “touch and feel” – a shoppers’ desire to hand pick their perishables such as fruit, vegetables, meat and dairy — is one of the more substantial roadblocks to widespread adoption of online grocery. Consumers think about grocery delivery and envision fresh items sitting at their door for an extended time.

“Many of the product quality concerns may be instantly mitigated by the fact that Amazon acquired Whole Foods, a high-end grocer with a reputation for having the highest quality products, rather than a value grocery store,” said Ryne Misso, Director of Marketing at Market Track, a data and analysis company.

“If Amazon can successfully combine their value and convenience formula with Whole Foods’ top-end product quality, consumers may have fewer concerns about buying online for delivery.”

With the addition of Whole Foods, Amazon has the opportunity to build on its Amazon Fresh grocery delivery service by adding more than 400 store locations that could be used as distribution centers and/or pickup sites for online orders.

A quarter of American households already buy some of their groceries online, according to the Food Marketing Institute and Nielsen, and that is only predicted to grow.

Should the acquisition come to fruition, Amazon’s mixture of a brick-and-mortar and digital presence will put it at the forefront of the continued growth of e-grocery. That is before considering how it may also incorporate its Amazon Go physical stores, and capabilities of Amazon Echo, Alexa, and Dash buttons.

So, while the actual milkman likely won’t be coming back anytime soon, the 2017 version of that fresh, daily service may now be closer to reality.

 

Image: MarketWatch.com