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Amazon's Whole Foods grab could be 'a brilliant combination'

27 June 2017

News that internet retailer Amazon is ponying up $13.7 billion to buy grocery chain Whole Foods has resulted in billions of dollars worth of stock value damage in the retail and food categories.

A Moody's analyst described the Amazon-Whole Foods deal as a "transformative transaction, not just for food retail, but for retail in general".

John Mackey will continue as chief executive of Whole Foods, and the company's headquarters will remain in Austin, Texas.

"Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy", said Jeff Bezos, Amazon founder and CEO, in a statement.

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Amazon on Friday announced it will buy Austin-based Whole Foods Market for almost $14 billion.

Shopper Earlene Garvey had a carload of groceries Friday from Whole Foods but said nothing is easier than having groceries delivered from Amazon's service AmazonFresh. It also is testing same-day fresh and frozen home delivery from 10 of its stores.

Instacart, valued at more than $3 billion, delivers groceries to customer doors in around 65 USA markets; it sources its groceries off the shelves of 160 partner grocers. Her daughter Bethany Capels agrees and says she likes Whole Foods for the organic fruits she can serve her kids.

Amazon will use technology (automation and data) to save Whole Foods, while Whole Foods will improve Amazon distribution - not just for groceries but other stuff as well.

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But the company had been forced to delay the store's launch, which was originally scheduled to open earlier this year, after experiencing technical difficulties with the cash register-free system.

Inside the stores, Whole Foods customers could see big changes, including easier checkouts.

Minutes after Amazon announced the Whole Foods deal, Instacart's name also popped into Twitter's trending topics as a brief moment of schadenfreude took hold.

Currently, it is unclear how Amazon will exactly use Whole Foods as the company did not release any further details. Walmart, which has the largest share of the US food market, has been working on lowering prices, while Target has been struggling to turn around its grocery business. It also had announced a board shake-up and cost-cutting plan amid pressure from activist investor Jana Partners. That is the eighth Amazon bookstore now open around the USA and more are expected in the future. While both companies aren't headquartered here - check out Austin Inno for the deal's impact on Whole Foods' home base - the deal is certainly going to have an impact here and everywhere else across the country, if only due to their collective reach. The merger offers a test of whether Amazon, which has generally built its business on low prices, can successfully integrate a grocer known for premium service and higher prices. Walmart is very much taking on Amazon and utilising its network to develop ecommerce and click & collect at its thousands of stores.

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Amazon's Whole Foods grab could be 'a brilliant combination'