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Amazon is usually incredibly secretive about its business plans. So when it announced last week it would pay $13.7 billion to buy health food giant Whole Foods, it caught many markets by surprise.
So, it's finally happened: Jeff Bezos' e-commerce colossus has officially moved into the world of online food shopping, backed by its fuss-free one-click groceries function. And it's serious about this new venture...
According to Amazon, the taking over of Whole Foods is the retailer's biggest acquisition to date.
This huge and unexpected commercial development holds major implications for the future of groceries, the entire food industry, and—as outlandish as it might sound—the future of shopping for just about anything you can think of.
But, when you break it down, the motivation for the deal is fairly simple really: Amazon is looking for a food-based in as well as urban real estate and Whole Foods is in need of a helping hand.
In recent times, Amazon has been expanding its empire into groceries and physical locations, including bookstores, rather unusually, working itself back into the brick-and-mortar business that it’s always aimed to disrupt. On the flipside, Whole Foods is the biggest name in high-end groceries and boasts a fleet of prime urban locations, which could easily double up as Amazon warehouses.
Since 2012, Whole Food's stock price has dwindled, sending the company into somewhat of a tailspin, and the company felt it would benefit from the backing of a formidable retailer like Amazon.
In summary, Whole Foods is falling towards the ground and Amazon it the perfect net in which to catch it.
Amazon is king of the kind of convenience shopping that appeals to today's consumer and according to John Bonno, co-head of grocery-consulting practice at AlixPartners:
The more they can create a consumer that doesn’t have to think, the better, and Amazon will likely work hard to make your purchases as seamless as possible - think “one-click groceries.
Amazon has strengthened its stronghold on the world of e-commerce and it will be interesting to see what supermarket chains on both sides of the pond will do to compete. Whichever way you look at it, these are exciting times indeed.
For more on the subject, check out this interesting insight on the impact on Amazon buying Whole Foods...
And for market-based wisdom, check out our list of hot penny stocks for 2017.