While antitrust experts expect Amazon.com Inc's (AMZN.O) bid for Whole Foods Market Inc (WFM.O) to win regulatory approval, some critics argue the deal should be blocked because it gives the online retailer a almost unstoppable head start toward domination of online grocery delivery.
Amazon is buying Whole Foods in a stunning move that gives it hundreds of stores across the USA - a brand-new laboratory for radical retail experiments that could revolutionize the way people buy groceries. In contrast, Whole Foods is intimidating to customers seeking affordable prices: they have a strong brand, but also high prices.
"Amazon has deeper pockets and has more - no pun intended - organic reasons for this deal", said Mark Hamrick, senior economic analyst at Bankrate.com. But he noted how Whole Foods might benefit from Amazon's expertise with technology.
"At what point do they own the entire food chain, whether in equity or buying power?" he said. "This disruptive and destructive battle between two of the nation's leading low-road employers like Amazon and Wal-Mart can only mean bad news for workers, and ultimately consumers, who in the future will nearly certainly be faced with fewer options and no real competition in the retail and grocery industries". The fact that food sales are not the core of Amazon's business is likely keeping Loblaw, Sobeys and Metro up at night.
Amazon does much the same for a variety of consumer products.
Whole Foods itself isn't that big, with fewer than 500 stores nationwide. "For example, the consumer perception of Whole Foods is that it is overpriced". Pooley / Stringer/ GettyWalmart isn't planning to challenge Amazon's $13.7 billion bid for Whole Foods, Reuters reported Friday, citing a source familiar with the matter.
The investing thesis appears to be that Amazon has hurt most retailers, therefore it will eventually hurt Costco. There has been endless speculation by analysts on what the intentions of Jeff Bezos, the founder of Amazon, are if the bid for Whole Foods is successful.
The running joke at a major retail real estate convention in Las Vegas last month was that food was the only thing Amazon hadn't yet figured out how to sell cheaply and deliver quickly. Costco is the most efficient retailer in the US and generates significantly higher revenues per square foot compared to most of its peers.
Mr. Hundley said Amazon ownership could result in lower prices at Whole Foods two ways - with Amazon altering the business model to one with greater efficiency or operating with tighter profit margins than Whole Foods.
"Publix can sit back and watch other competitors get bigger by buying subpar grocers and going further into debt by doing it", he said. "If their share price goes down, it's a sign they'll be under more competitive pressure", said Alden Abbott, antitrust expert at the Heritage Foundation. "Publix has a very solid growth plan in place". The 365 brand is virtually unavailable online, but that will change if Amazon is smart about it. Amazon has been trying to get into the grocery and food market for some time, particularly with Amazon Fresh. The company agreed to pay $42 per share for Whole Foods, representing a 27% premium to the WFM's closing price one day previously.
Wal-Mart spokesman Greg Hitt declined to comment on whether the company is considering a bid for Whole Foods. Khan wrote a paper titled "Amazon's Antitrust Paradox" that appeared this year in the Yale Law Journal. If they want to succeed, they will have to do so against every tangible (and intangible) metric you can think of. The company would gain insight on how people shop in stores, in addition to the information it already has on how they shop online.
"We will be joining a company that's visionary", Mackey said in a town hall meeting, the transcript of which was provided in the filing. Most Whole Foods customers have at least one concern about an Amazon takeover, including food quality and ethics; less than a quarter (24.3%) have no concerns.
He also expects that Amazon will demand lower prices from food manufacturers than Whole Foods has. "I don't think sprouts has the expertise or management capability of that kind", he said. "That would spook anyone they went to for financing", said Rothbort.