Everything you should know about Amazon and Whole Foods Market Merger

 

In 2017, Amazon had announced the acquisition of Whole Foods Market for $13.4B. Amazon had acquired the Whole Foods for three years. As the news broke out, experts have begun to analyze this decision. Before we let you know how Amazon will provide whole food grocery delivery service, let’s know about Amazon and Whole Foods Market.

Amazon

Amazon is a celebrated e-commerce and cloud computing company based in Seattle, Washington State. It is the biggest internet-based retailer globally by net sale of around $136 billion and by market capitalization of around $465 Billion. Besides selling groceries, Amazon manufactures and sells electronic devices, including Kindle e-readers, Fire TV, and Echo. Amazon was started as an online marketplace for books, but over time, it expanded to sell other stuff like apparel, video games, furniture, toys, foods, jewelry, software, etc. Amazon suppressed Walmart in 2015 by market capitalization.

Amazon is known for introducing technology innovation in its business. Likewise, Amazon always tries to improve its customer experience. In 2018, Bezos announced two days delivery service. Amazon has subsequently increased its footprint by entering into new businesses. Resultant, Amazon stated many new businesses, including Amazon Prime. Amazon Prime is very popular among the folks, which has suppressed 100 million subscribers worldwide.

 

Whole Foods Market

Whole Foods Market is a well-known natural and organic foods supermarket based in the USA, with a market capitalization of around $ 13.46 Billion. In 2016, the company had recorded sales of approx $16 billion. Whole Foods Market has more than 460 stores in the United States, Canada, and United Kingdom. The company is supposed to increase its number of stores, seeing the increasing demand.

In a statement, the CEO and founder of Amazon, Jeff Bezos, said that millions of people love Whole Foods Market as they offer fresh and organic foods. They encourage them to eat healthily.

Whole Foods Market is serving the customers for nearly four decades, and they are doing a fantastic job. The customers are satisfied and delighted to choose Whole Foods Market. Whole Foods Market is considered an upmarket store. Simply, it is an excellent place to make a purchase.

On June 16, 2017, Amazon and Whole Foods Market had announced that they had signed a merger agreement under which Amazon will acquire Whole Foods Market for $13.4B with Whole Foods Market debt.

As per this acquisition, Whole Foods Market will continue to operate its stores across the country under the Whole Foods Market brand. Likewise, the company will continue to source whole foods from vendors and partners across the world. The company CEO will not be changed, and the headquartered will stay in Austin, Texas.

Benefits to Amazon from the whole deal

 

• This deal with give an entry to Amazon in the grocery store business
• The deal will also give an infrastructural boost to Amazon. Whole Foods delivery stores are spread in different cities of the country.
• Amazon Prime has around 64 million subscribers across the world. Based on the survey, the prime members spend a considerable amount of money. The company is supposed to give discounts to those members who regularly visit Whole Foods Market stores. The affluent families spend around $500 per month at Whole Foods stores. Amazon is hoping to get advantage of it.
• Amazon share is likely to increase the current value. And it will recover the entire deal value within in a few years.
• Amazon will also get logistics benefit with its network of warehouses, delivery routes, etc.

Whole Foods Market is a leading brand in offering organic and natural in grocery stores. The company faces competition from Kroger chains and Target. The shares of Kroger, Target, and other companies tumble on the day of acquisition.

In general, online shopping has a lower profit margin, as it involves extra expenses compared to direct selling. Amazon expects to increase its profit margin after the acquisition. As per the study, online grocery shopping will take a 20% market by 2025.

In 2018, the popular online grocery delivery provider Instacart indicated to wind down its partnership with Amazon-owned Whole Foods Market. The founder and CEO of Instacart, Apoorva Mehta, in a blog post, said they would start pulling its shoppers who pick, bag, and deliver the grocery to the customers. Whole Food Instacart partnership no longer exists. 

 

Conclusion

Besides the Whole Foods Market acquisition, Amazon had introduced Amazon Go that is a machine learning technology enable store. With the success of Amazon Go, Amazon has decided to expand its business and want to enter the grocery store market. Therefore, the company has acquired Whole Foods Market, losing the market share and facing colossal loss. 

Amazon competes with other big plays Like Walmart. The other players will need to collaborate with others or update their existing technology to compete with Amazon. It is a masterstroke by Amazon that has helped expand its business and increase revenue.