With almost 50% of all USA households locked in to the service, Amazon has the chance to convert loyal Prime members into super grocery shoppers, with an expansion of AmazonFresh, their online grocery delivery program, and by integrating further benefits for Prime-only members, Amazon would be set up to creating stronger brand loyalty around the Whole Foods brand. But the companies say they don't plan to change Whole Foods' standards, which includes a ban on artificial ingredients that shuts out products like Diet Pepsi and Oreo cookies. Bonobos, along with Modcloth, a specialty women's apparel brand acquired in March by Wal-Mart, will be overseen by Lore, who will market the clothing lines on Jet.com and the companies' own websites.
But if Amazon can be the one-stop shop for everything - groceries had been one of the key missing elements - customers would have even less of a need to go to Walmart or elsewhere. For Whole Foods shoppers, that could mean lower competitive prices, something that Amazon's done when it's entered other industries. This theory fits with Amazon's business model of everything all at once, and Whole Foods employees may now find themselves working at mini-Amazon warehouses.
But it was Whole Foods that fell behind as shoppers found alternatives to the organic and natural foods it helped popularize since its founding in 1978. Bahige El-Rayes, a principal in the retail practice of management consultancy A.T. Kearney, expects the Whole Foods purchase to pave the way for Amazon's ascendancy in other sectors like apparel and pharmaceuticals. Walmart, which has the largest share of the US grocery market, is ramping up its grocery services as a way to fuel online sales. The deal creates a hybrid retailer - with brick-and-mortar and online offerings - that could serve customers more efficiently than traditional stores.
Whole Foods' peer Kroger Co, as well as Target Corp and Costco Wholesale Corp, have also been identified by analysts as potential bidders for Whole Foods.
Some shoppers are fretting about big companies they don't like taking over their favorite brands. So rather than discuss how the acquisition of Whole Foods completes a successful effort for Amazon, I would strongly suggest that the acquisition is simply another attempt to solve a problem which, to date, has remained a huge challenge for Amazon.
Both companies said there will be no layoffs, but they did not respond to other questions about Amazon's plans for Whole Foods.
Whole Foods 365 offers private-label goods and lower prices than typical Whole Foods stores, and is targeted at younger, value-conscious shoppers. Thompson paraphrased: "Amazon's goal is to take a cut of all economic activity".
"The food stores would be ideal outlets for popular Amazon products, such as Echo, Fire TV and Kindle, given the favorable demographics of the customer base", said Pachter. And with a more customer-focused workforce than Wal-Mart - which is more efficiency focused - it's no surprise that Whole Foods generates less revenue per employee than Wal-Mart. What do you think about the deal that Amazon is getting?
"Amazon building their own chain now looks unlikely, but having a bricks and mortar chain is regarded, even by the innovator Amazon, as the only way to guarantee a long-term profitable business", said the former Aldi Australia executive turned retail consultant.
Instacart already uses customer behavioral data and search activity to anticipate what a customer wants or might like, he said. You could have free grocery delivery from Whole Foods for Prime members, you could have discounted prices at Whole Foods, a blanket discount for Prime members.
How quickly items get delivered "is going to have to be improved considerably" for customers to order something online instead of going to the prepared-foods counter at the supermarket, she said. I think we're gonna see a lot of technology. The stores could also showcase gadgets such as Kindle e-readers and Fire tablets. But what we do know is that Amazon doesn't make a significant investment in something unless every small detail has been worked out beforehand.
The Associated Press provided information for this story.