Amazon deal for Whole Foods could bring retail experiments

A Wall Street sign near the New York

A Wall Street sign near the New York

Amazon.com Inc.'s AMZN 2.44% purchase of Whole Foods WFM 29.10% Market Inc. could fill an important logistics gap for the online retailer, providing hundreds of stores perfectly positioned to serve as pickup and delivery hubs for urban customers.

"It's amusing. I was just ordering something on Amazon", said Nick Yezierski, a hotel manager who was eating breakfast outside the Whole Foods flagship store in Austin, Texas. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the United Kingdom could be turned into distribution hubs - not just for delivering groceries, but also as pickup centers for online orders.

The US$42 a share offer from Amazon is a 27 percent premium over Whole Foods Market's closing stock price on Thursday. God, just imagine Alexa's power when she'll be able to give the price of 28-day dry-aged beef in the Whole Foods meat department. And shoppers may be skittish about having Amazon take over one more element of their shopping experience.

John Mackey will remain CEO of the company. Whole Foods itself had launched an offshoot chain named after its "365" private label brand in a nod to the popularity of no-frills chains. Whole Foods has seen its sales slump and recently announced a board shake-up and cost-cutting plan amid pressure from activist investor Jana Partners.

He said he expects the marketing to begin shortly after the combined company closes the deal in the second half of the year. "That's what shoppers are looking for", he said.

And owning a grocery store fits into Amazon's big plans to ultimately sell consumers "everything". The shopper's Amazon account gets automatically charged. "Most of us like to see what we're buying, and it's a good store, but we just wouldn't buy online", he said.

That was feeling of Taylor Malooly, 19, a University of Texas student at Whole Foods in Austin, who said a Whole Foods delivery service would have to be fast if he were to try it. That's more or less what Bezos did after purchasing The Washington Post, aside from offering some free subscriptions to Prime Members.

"This might be an opportunity for consumers who have felt that Whole Foods is inaccessible", said Lauren Beitelspacher, a marketing professor at Babson College in MA.

Two years later Whole Foods Market was incorporated after their tiny SaferWay - a parody of the once-dominant nationwide Safeway chain - merged with Clarksville Natural Grocery.

With this strategy, Amazon is planning to make the prices competitive and attract "more low- and middle-income shoppers" to its retail stores, which may still be located in posh localities.

Amazon would also look to change Whole Foods' inventory, introducing its own private-label products to replace items deemed too expensive to have mass appeal, the person with knowledge of the matter said. It also marks a turning point in Amazon's strategic efforts when it comes to cracking the $600 billion grocery market.

Ginny Byrne of Plainville said she uses Amazon, finding the shopping to be easy.

Several have, however rebuked the over-priced "extravagant" reputation of the organic supermarket chain as not being in line with Amazon's vision.

"Instead of deliver to my home, why not just come down here?"

A former grocery expert at Amazon predicted that the chain, nicknamed "Whole Paycheck", would add a selection of discounted food and build out non-grocery areas within stores, particularly for pharmacy and Amazon devices.

That could help Amazon both cut shipping costs and draw more customers into Whole Foods locations.

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AP Retail Writer Anne D'Innocenzio and Business Writer Stan Choe in NY and writer Susan Haigh in West Hartford, Connecticut, contributed to this report. The response, in a word, is heartening. And our promise to you is that we will always strive to provide indispensable journalism to our community.

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