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Amazon's Acquisition Of Whole Foods

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In June 2017 Amazon sent shockwaves around the retail industry with its purchase of Whole Foods for 13.7 Billion. This acquisition represents a major transition for Amazon, they are predominantly known for their online capabilities and lightning fast shipping. this acquisition automatically catapults them into the brick and mortar grocery chains across the country. This unexpected move by Amazon caused stocks to plummet for other competitors in the grocery store industry. Walmart’s stock fell 5% following the announcement of the acquisition, as well as Kroger whose stock price fell 10 %.
Whole Foods is known for their fresh and organic products, they have around 400 stores across the United States. Their products do come with a hefty price
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Whole Foods has been doing an amazing job keeping up with their financial performance and customer demands. The more customers who demand their business the more locations they open. This in return gives Whole Foods more revenue as each year passes. Whole Foods report its annual fiscal years on a 52 week basis. Whole Foods expectation for 2016 are 3-5% growth in sales.

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This week , Jeff Bezos, CEO of Amazon, purchased high-end grocer Whole Foods Market causing a painful stock devaluation amongst other retail grocers, according to Michael Hilzick, LA Times staff writer. While Bezos paid top dollar for the company, and improved Amazons stock price; other grocery sellers watched stock values plunge as much as 9% , as was the case for Walmart. Most confusing to stock watchers is what Amazon hopes to gain with the purchase: consumer data, distribution centers, retail store fronts, or on-line grocery market share? The purchase of Whole Foods gives Amazon access to more than 400 high-end store fronts and strategically located distribution centers around the world.

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From 1984 onwards, Wholefoods Company started to became stronger that leads to huge expansion in all over USA. Nowadays, Wholefoods became a trademark cannot be underestimated. Wholefoods now own more

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Established in 1978, Whole Foods Market opened its first store in Austin, Texas in 1980. This natural supermarket was the first certified organic food supermarket in the U.S. Now, 456 stores stretch across the nation, Canada, and the U.K. (see appendix A with the various states and locations) with 35,000-50,000 SKU’s lining the shelves. Whole Foods sets high standards for not only it’s product freshness but also expectations of employees. High customer service, environmental stewardship, positive impact on local and global communities, and high return on invested capital has made Whole Foods Market an industry leader being 5th largest public produce and food retailer.

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From shared operating and advertising costs to exposure to diverse customer demands. However, the ability to respond to changing consumer needs and a combination of wholesaling and retailing operations led to the biggest and most noticeable effect, lower prices to consumers. The heart of the Wal-Mart strategy was to aggressively plan, organize and outthink their competitors by providing the best products, values, and prices. The Wal-Mart mission and vision statement “Saving people money so that they can live better.” (Wal-Mart, Inc., 2017)

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Anyone familiar with the concept of supply and demand would agree that if the popularity of these whole foods were to increase, the prices would decrease, making it not only “tailored to the small elite minority”, but accessible to everyone, including those in

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Due to the size Walmart and its magnitude of power, as previously mentioned, once Walmart financially supports businesses and buy from them, they are forced to satisfy Walmart’s demands. These businesses have to please Walmart because they will buy so much of what they produce that without Walmart, they would be forced to close due to the substantial amount of financial

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Single-handedly, they have been able to target a vast array of consumers as well as destigmatize their brand as being upscale or inaccessible to the everyman. For reference, the company is often referred to as "Whole Paycheck," as a way of highlighting one of the most negative side effects of eating organic ("Whole Foods Tries to Shake 'Whole Paycheck' Rep with Cheaper Spinoff"). Whole Foods holds a negative stereotype as being something that only wealthy people can afford, something that is both unfortunate and realistic at the same time. Whole Foods, is showing that two “average joes,” can not only purchase high quality, stereotypically masculine food items; but also, a brand that appeals to vegans. Which has followers of a paleo diet and has achieved a great deal of brand exposure.

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Two of these reasons stem from Amazon’s acquisition of Whole Foods. Previously, the grocery market was highly fragmented and Costco had a consistently growing market share. However, investors fear that with Amazon taking over Whole Foods, Amazon may take over yet another segment in the overall market just like they have books and general goods. The market responded with a more than 10% drop in stock price following Amazon’s ‘game changing’ announcement. Image and perception are huge to today’s consumer, and if customers lost faith in Costco’s capabilities and future, this could result in continued drop in stock price.

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This significantly assists them in attracting more customers, thereby increasing their sales. Moreover, the firm's governance and leadership demonstrate that Whole Foods' significant accomplishments are the result of the company's integration of consumers, employees, and the broader community. The company's core values, which include concern for the community and the environment, demonstrate its commitment to the success of all stakeholders. There were very few natural foods markets available during the time period in which these young entrepreneurs began their businesses. This demonstrates that the market was so favorable for them and that competition was minimal.

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The company’s product selection is wide-ranging and it includes grocery, meat, seafood, prepared foods and catering, bakery, coffee, tea, wine, beer, cheese, vitamins, nutritional supplements, body care, and lifestyle products including pet products, books, and household products (Whole Foods Market, 2016).

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To start off, Amazon the worlds number one online E-Commerce retail business, is trying to buy Whole Foods which is known for their healthy, high quality foods at a higher cost then regular grocery stores. Amazon has a very good background when it comes to online sales and deliveries. Amazon saw an opening with Whole Foods in that if the two work together they can bring consumers more convenience when buying groceries online then picking them up at a local Whole Foods store. That alone plus is a huge step forward for both companies and consumers as well. Amazon could also help in the department of lowering the prices on all Whole Foods Products so that anyone can afford it no matter the budget, that's what Amazon is known for, their low prices.

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In just a month of its establishment Amazon was selling books to all 50 states of the US and Canada. From the onset the company had ambitions of being an “everything store” (funding universe, 2004). Over the years Amazon increased its offerings to include DVDs, electronics, furniture and other consumer goods (Amazon.com, 2015). The product range increase was accompanied by a series of acquisitions. Oliva et al (2003) describes Amazon to be using a get big fast (GBF) strategy which is premised on keeping prices low while expanding market

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Amazon is number one in competing Walmart especially in online retailer and now opining fiscal stores starting with Amazon Campus store in 2015, available at several college campuses in US the Amazon Campus stores serve as a central hub where student retrieve deliveries from lockers and drop off returns, all free of charge. Over the past three years, while Walmart’s sales grew by 8.6 %, revenue at Amazon has nearly doubled. Then, Costco is also major competitor to Walmart, particularly to Sam’s because of its low price.

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Investors in Wal-Mart were aware of the obstacles that the giant retailer would face due to the changing consumer preferences and behaviors. However, the financial reports showcased that its online strategy was successful. At the end of the second quarter in 2017, Wal-Mart reported revenue of $123.4 billion, which was an increment of about 2.1% over the previous year quarter. There was also an increase in comparable sales by 1.8% year over year. Wal-Mart has significantly focused on structuring its online sales, while using its already well-established brick and mortar stores and excellent supply chain and logistics to its big advantage.

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