Amazon has made its biggest acquisition ever: Whole Foods for $13.7 billion. That number includes Whole Foods' net debt:
The deal, expected to close in the second half of this year, gives the e-commerce giant — which has been experimenting with various physical store concepts to make itself a name as a food purveyor — an instant expanse of 460 high-end brick-and-mortar stores across the U.S., in Canada and in the U.K.
Whole Foods, which made its name retailing organic and fresh products, had been struggling recently amid stepped-up competition from Costco Wholesale, Trader Joe's and other grocers.
Shares of Whole Foods rose ahead of the acquisition while analysts speculated that other grocery retailers would snap up Whole Foods to keep it away from Amazon, or at least drive up the price.
Groceries are low margin and high cost businesses. This acquisition may be seen as part of a long-running war between Amazon and Walmart.
Will the shelves of Whole Paycheck be stocked by Amazonk's mighty robotic Prometheans? I think I'll shop at ALDI instead.
Previously: Walmart Plays Catch-Up With Amazon
Walmart Kills Amazon Prime-like Service, Expands Free Shipping
Amazon Shuts Down Diapers.com as Founder Runs Walmart's E-Commerce Operations
Related Stories
James B. Stewart writes in the NYT that for the past 16 years Walmart has often acted as though it hoped Amazon would just go away. When Walmart announced last week that it was significantly increasing its investment in e-commerce, it tacitly acknowledged that it had fallen far behind Amazon in the race for online customers. Now, the magnitude of the task it faces has grown exponentially as e-commerce growth continues to surge globally. "Walmart.com has been severely mismanaged," says Burt P. Flickinger III. "Walmart would go a few years and invest strategically and significantly in e-commerce, then other years it wouldn't. Meanwhile, Amazon is making moves in e-commerce that's put Walmart so far behind that it might not be able to catch up for 10 more years, if ever."
In 1999, Amazon was a fledgling company with annual revenue of $1.6 billion; Walmart's was about $138 billion. By last year, Amazon's revenue was about 54 times what it was in 1999, nearly $89 billion, almost all of it from online sales. Walmart's was about three times what it was 15 years before, almost $486 billion, and only a small fraction of that — 2.5 percent, or $12.2 billion — came from Walmart.com. Walmart's superefficient distribution system — a function of its enormous volume and geographic reach — was long the secret to Walmart's immense profitability. Ravi Jariwala, a Walmart spokesman, says that Walmart is building vast new fulfillment centers and is rapidly enhancing its delivery capabilities to take advantage of its extensive store network to provide convenient in-store pickup and adds that 70 percent of the American population lives within five miles of a Walmart store. "This is where e-commerce is headed," says Jariwala, which is to a hybrid online/in-store model. "Customers want the accessibility and immediacy of a physical store," along with the benefits of online shopping.
Walmart is canning a premium online ordering service and expanding its free shipping on various items instead:
Walmart announced free two-day shipping to home and stores on more than two million items, without a membership fee. The new offer is available starting at 8 a.m. EST today. With this announcement, Walmart has also lowered the minimum purchase required for free shipping to home to $35, from $50. Items being shipped to stores continue to have no price threshold.*
[...] Walmart's free two-day shipping will be available on the items customers shop the most, including household essentials such as baby necessities, pet products, food, like cereal and peanut butter, cleaning supplies and beauty favorites, as well as top electronics and toys.
[...] *Freight and marketplace are not included. Program is available in the contiguous United States.
Walmart recently bought Jet.com, an online e-commerce company with "an attractive brand with proven appeal, especially with Millennials, the first generation of true digital natives".
Meanwhile, Amazon is expanding its digital advertising business (before potential customers realize the scale of online ad fraud) and ordering the production of anime.
Amazon is shutting down several websites it acquired when it bought Quidsi. Quidsi's co-founder went on to launch an Amazon competitor which he sold to Walmart for $3.3 billion:
Amazon said on Wednesday that it is shutting down Quidsi, one of its largest-ever acquisitions, which runs six shopping sites, including Diapers.com, Soap.com and Wag.com. The shutdown will result in layoffs of 263 people, according to a New Jersey state filing. But Bloomberg, which first reported the news, said some of these employees would be able to apply for new positions at Amazon. In a statement, an Amazon spokesperson blamed the shutdown on profitability issues.
[...] Quidsi's co-founder and then-CEO Marc Lore worked at Amazon for a few years following the deal, but it is an open secret in the industry that he did not enjoy his time there. He went on to launch an Amazon competitor, Jet.com, in 2015, which he sold last year to Walmart for $3.3 billion.
Lore now runs all U.S. e-commerce operations for Walmart, Amazon's biggest competitor stateside. Last week, he told me in an onstage interview at Code Commerce that his long-term goal for Walmart is to win the U.S. e-commerce battle. I asked him if that means being the No. 2 player behind Amazon, since the Seattle giant has such a huge lead. "Win means win," Lore said.
Amazon faces some regulatory hurdles before it can consume Whole Foods:
The top Democrat on the U.S. House of Representatives' antitrust subcommittee has voiced concerns about Amazon.com Inc's $13.7 billion plan to buy Whole Foods Market Inc and is pushing for a hearing to look into the deal's potential impact on consumers.
The deal announced in June marks the biggest acquisition for the world's largest online retailer. Amazon has not said what it will do with Whole Foods' stores and other assets, but analysts and investors worry the move could upend the landscape for grocers, food delivery services and meal-kit companies.
U.S. Representative David Cicilline requested the hearing on Thursday in a letter to the chair of the House Judiciary Committee and the subcommittee chairman. Shares of Amazon were up 0.3 percent in mid-morning trading on Friday. "Amazon's proposed purchase of Whole Foods could impact neighborhood grocery stores and hardworking consumers across America," Cicilline said in a statement. "Congress has a responsibility to fully scrutinize this merger before it goes ahead."
The deal must be approved by U.S. antitrust enforcers, in this case most likely the Federal Trade Commission.
From U.S. Congressman David N. Cicilline's letter:
Some have also raised concerns that the transaction will also increase Amazon's online dominance, enabling it to prioritize its products and services over competitors. Amazon uses its e-commerce platform, which reaches nearly half of American online shoppers, "to spot new products to sell, test sales of potential new goods, and exert more control over pricing."[5] Expanding its retail footprint through this transaction may increase the risks of self-dealing and preferential treatment of its goods on this platform.[6] According to a report by ProPublica Amazon's pricing algorithm favors Amazon and its sellers by favoring "its own products ahead of better deals offered by others it charges for services."[7] Acquiring additional sources of consumer data through this transaction may increase the risk of self-dealing or enable Amazon to leverage its platform over other businesses.[8] As Gene Kimmelman, the President of Public Knowledge, recently observed, questions of platform dominance should be taken seriously to ensure that "no company uses its market power to foreclose competition, or to leverage its success in one market to gain an unfair advantage in another."[9]
Cities Dream Of Landing Amazon's New HQ And They're Going To Great Lengths To Show It
Officials in Tucson, Ariz., uprooted a 21-foot-tall saguaro cactus and tried to have it delivered to Amazon's Seattle headquarters. Birmingham constructed giant Amazon boxes and placed them around the Alabama city. In Missouri, Kansas City's mayor bought a thousand items online from Amazon and posted reviews of each one.
All of these cities are clearly trying hard to get Amazon's attention. Why? Because they know that otherwise, they don't stand a chance against some big-name cities that are all trying to win the contest to land Amazon's second headquarters.
The retail giant announced a month ago that it has plans for a second home outside of Seattle, where it is currently headquartered. The project has been named HQ2, and the deadline for final bids is Thursday. Amazon has promised to invest $5 billion and said the facility will create as many as 50,000 jobs.
It has led to a mad scramble from cities across the nation and even in Canada. And various publications have analyzed cities' chances of landing this deal. Atlanta, Denver and Pittsburgh have made it to a few of those lists.
Many cities don't really figure as finalists on any of those lists. But that hasn't stopped them. In fact, just like Tucson or Birmingham, cities are pulling out all the stops to get noticed.
The Amazonk Prometheans may be coming to your city...
Previously: Amazon Spheres Add to Seattle's Quirky Architecture
Amazon Acquires Whole Foods for $13.7 Billion
Amazon to Invest $5 Billion in Second HQ Outside of Seattle
Amazon Looks to New Food Technology for Home Delivery
(Score: 5, Funny) by McGruber on Friday June 16 2017, @11:38PM (6 children)
Even Amazon paid too much shopping at Whole Foods...
(Score: 0) by Anonymous Coward on Saturday June 17 2017, @12:26AM (2 children)
Where does Whole Foods have stores where minimum wage is 50 cents?
(Score: 2) by frojack on Saturday June 17 2017, @01:59AM (1 child)
You should be asking Where does Whole Foods have stores with flat roofs for drone landing pads.
Amazon has no interest in dealing with walk in customers.
No, you are mistaken. I've always had this sig.
(Score: 0) by Anonymous Coward on Saturday June 17 2017, @03:49AM
Which is why they have those grocery stores they built?
https://www.usatoday.com/story/tech/news/2016/12/05/amazon-go-supermarket-no-checkout-no-cashiers-artificial-intelligence-sensors/94991612/ [usatoday.com]
(Score: 3, Interesting) by bob_super on Saturday June 17 2017, @12:26AM (2 children)
How many people live within drone reach of a Whole Foods?
(Score: 0) by Anonymous Coward on Saturday June 17 2017, @12:35AM
Right here. Whole Foods is my neighborhood grocery store. Also my neighborhood cell tower is on the roof of the Whole Foods.
I do most of my shopping in the next neighborhood over the river on the wrong side of the railroad tracks. Unless I'm feeling particularly lazy I don't shop at the Whole Foods.
(Score: 2) by kaszz on Saturday June 17 2017, @10:45AM
Why do I come to think of the German V-1 when you write that? ;-)
(Score: 2) by MichaelDavidCrawford on Friday June 16 2017, @11:54PM
"Whole Foods employees murdered Jesus."
That's at Portland's Pearl District store.
Yes I Have No Bananas. [gofundme.com]
(Score: 3, Interesting) by takyon on Friday June 16 2017, @11:56PM (8 children)
I thought I was joking when I resurrected the Amazonk Prometheans in the summary. Then I opened Google News a couple hours ago and found that this was the #1 top story, leading a group of related Whole Amazon Foods stories:
People are worried Amazon will replace Whole Foods workers with robots [washingtonpost.com] (archive [archive.is])
"Got dat kombucha on tap boi"
- Robutler
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 3, Insightful) by edIII on Saturday June 17 2017, @12:59AM (7 children)
That's why I won't buy anything at Amazon period. They kill mom & pop shops locally, have killed independent bookstores, and now want to do the same with grocery stores.
I don't give a fuck how low the prices can be, it hurts American Workers every single time you buy anything from them. When, not if, they replace their workforce with robots, I will give a big I-Told-You-So to be people that supported them.
Ironically, Whole Foods is anything but cheap. It's for yuppies with money, and young people that apparently live consequence free on mommy & daddy's dime. Normal people can't shop there for anything but some super niche product, and that's starting to not be true. In Northern California Olliver's Market is eating their lunch, and some local shops have the specialty items cheaper than Whole Foods.
Unless Amazon can figure out how to lower Whole Food's prices by at least 50%, they're not really competing with anybody. Just existing in the high end grocery market for Elites and their House "Slaves".
Technically, lunchtime is at any moment. It's just a wave function.
(Score: 2) by takyon on Saturday June 17 2017, @01:04AM (1 child)
I went to Whole Foods once. I was triggered by the high prices and left.
I went back another time to pick up some enoki mushrooms since I figured my chances of finding them elsewhere were nil. They didn't have a price for them and rang them up as some other mushrooms, at a very reasonable price per lb. And then I made hot pot [wikipedia.org].
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 0) by Anonymous Coward on Saturday June 17 2017, @03:52AM
It depends what you're looking to buy. Most things they sell are grossly overpriced, but there are good deals to be had on things like bulk herbs if you're paying attention.
The big problem they had was that they were asking more than the competition and weren't really giving anything that other stores couldn't eventually provide. Early on they were sort of specialish in that their main competition was farmer's markets, but without the dirty hippies.
(Score: 0) by Anonymous Coward on Saturday June 17 2017, @01:23AM (2 children)
Elites don't like to shop amongst people flashing WIC and EBT cards.
(Score: 3, Insightful) by takyon on Saturday June 17 2017, @01:26AM (1 child)
Maybe Amazon will introduce its "take items off the shelves and walk out of the store" concept into all Whole Foods locations. You have to have an Amazon account and an expensive smart phone. If you don't have either of those, you get gassed or poison darted at the entrance.
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 0) by Anonymous Coward on Saturday June 17 2017, @05:22AM
NB! remember that poison, the dart and the blowpipe HAVE all got to be Vegan Certified Organic.
Next year's headline per Amazon's Master Plan: "Amazon buys ALDI". :)
(Score: 2) by kaszz on Saturday June 17 2017, @10:49AM (1 child)
Northern California Olliver's Market and local shops is the place to go now that Whole Foods will be ruined?
(Score: 2) by edIII on Monday June 19 2017, @07:12PM
Some of my family had shopped at Whole Foods, but every time I went the prices were so fucking ridiculous I couldn't understand how they could stay in business. They did, and still do, have some nice products that aren't in regular grocery stores. They are facing more competition for those products now from Safeway. Gluten free used to be something that only Whole Foods catered towards, now it is everyone. Now with Amazon buying out Whole Foods, whatever wholesome local image they may have had is now destroyed and replaced by Amazon's robotic corporate profit-above-all image.
As for the quality of their vegetables, who gives a shit at those prices. Olliver's competes with them on that, but the local farmer's markets kills all of them. High quality fruits, veggies, and meat are available there, and I would rather give my money to local farmers than Big Ag. That's for what I'm not getting in my garden already.
Olliver's is a premium store, and higher prices, but is at least local and helps the community out. Whole Foods just helps out some shareholders that give a fuck about nobody except money, which they hold up as their God. I don't even think that they have any programs designed to give back to local communities, and with Amazon now owning them, I'm sure they won't.
Technically, lunchtime is at any moment. It's just a wave function.
(Score: 3, Informative) by Snotnose on Saturday June 17 2017, @02:37AM
Some 15-20 years ago a Whole Foods opened up in my neighborhood. I was both the buyer and the cook in my marriage, I went to Whole Foods and could not believe the prices. About 3 years ago they opened a store in Del Mar (San Diego north), went to it with a friend and was surprised with the prices. Maybe 10% higher than Vons. But the Whole Paycheck meme had been applied, and stuck.
When the dust settled America realized it was saved by a porn star.