Why is Whole Foods Acquisition not enough for Amazon?

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Amazon is a leading grocery delivery and cloud computing company based in Seattle, Washington. With total net sales of around $136 billion, Amazon is the world’s largest internet-based retailer. The company manufactures and sells electronic devices such as Fire tablets, Fire TV, Kindle e-reader, and Echo. Likewise, Amazon is the world’s largest provider of cloud infrastructure services.

Whole Foods

Whole Foods Market is a well-known natural and organic foods supermarket based in the US with a $13.46 billion market capitalization. Likewise, this whole food supermarket has recorded sales of approx $16 billion in the fiscal year 2016. The company has more than 460 stores in America, Canada, and the United Kingdom. On average, over eight million customers visit the stores each week, making it the sixth-largest grocery store.

On June 16, 2017, Amazon and Whole Foods Market announced that they have entered into a merger agreement. Whole Foods Market will continue to operate stores under the Whole Foods Market brand, and the CEO will remain the same for Whole Foods Market. Plus, Whole Foods Market will also continue to source from trusted partners and vendors across the world for whole food grocery delivery.

It has been around 3 years since Amazon has acquired Whole Foods for $13.7. In these years, many changes are made to Whole Foods at the store and corporate level. Some of these changes are highly appreciated, while others have left people asking what has happened to Amazon. The company’s biggest change was the centralization of operations at the Austin, TX headquarters.

Benefits of Amazon from this acquisition

• This deal has given entry to Amazon in the grocery store business of $700 billion in the US.
• This deal also gives a boost to the infrastructure of Amazon as Whole Food grocery stores are located across the most affluent neighborhoods in the US.
• The company will give lucrative discounts to non-prime shoppers who regularly visit Whole Foods Market stores.
• By this announcement, the Amazon shares will increase, adding almost $14 billion to the value, recovering the entire value of this merger.
• Amazon logistics across North America will get added advantages.

Whole Foods Isn’t Enough.

Amazon is always viewed as an unstoppable force by the analysts who were also certain that it would impact the grocery industry. But the Amazon cannot scale Whole Foods as the market for organic food is small. As per the latest numbers, Whole Foods only operates 472 stores that are very less than the top five grocery industry leaders. For instance, Walmart operates 3569 supercenters and generates over 50% revenue from groceries. Kroger operates 2650 stores and is recognized as a pure-play grocery retailer. Likewise, Aldi operates 2386 stores and likely to operate over 2400 stores by 2024. Lastly, Albertsons operates 2249 stores, and Ahold-Delhaize operates 1958 stores.

The well-known business analyst has shared some possible ways for Amazon to increase store counts to entertain more customers.

• Acquire Kohl’s 1162 stores and start Amazon-branded grocery stores inside each location.
• Acquire Target’s 1868 stores and open Whole Foods Markets and Amazon-branded grocery stores inside Target’s stores.

Acquire JC penny because malls are drying due to COVID19. Amazon has an opportunity to acquire JC Penney stores in the best locations in the country.
It will help Amazon reimagine the shopping mall experience with groceries, gaming, and stores for retailers powered by Amazon Tech and collaborating fulfillment. JC Penney acquisition will allow Amazon to leverage small space for apparel and private level furniture. JCP has valuable private label apparel, and acquiring JCP gives Amazon the ability to create a physical version of Shopify.

Reimagine the grocery experience by installing Micro-fulfillment centers

On the other hand, Amazon should also increase each Whole Food Market’s efficiency by installing the Micro-fulfillment centers, automating the online grocery fulfillment and pickup orders.

The micro-fulfillment centers can be installed inside selected Whole Foods stores and placed in offsite locations. Amazon can easily set-up hundreds of small stores that operate like a vending machine using micro-fulfillment as the store’s core for ordering groceries online whole foods.

Amazon should acquire regional grocery chains that have been failed or have gone out of business. Amazon has plenty of options. So, Amazon should think beyond the acquisition of the Whole Foods Market.

As a reputed business leader, Brittain Ladd has discussed the possibilities in detail in their recent article. You must go through it to uncover these possibilities and understand what Amazon can do to continue growing in the grocery retail business.

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