How will Amazon’s Whole Foods buyout affect the industry?

Amazon has announced that it will be buying Whole Foods for USD $13.7 billion.

After months of speculation, the e-commerce giant has acted on rumours that it would be purchasing the natural health foods retailer. Following this, stocks for Target, Kroger, United Natural Foods, and Walmart fell.

 

However, this acquisition will not only affect Amazon’s direct competitors: its effects will slowly but surely trickle down into the world of independent grocers.

 

For independents, this represents the complete integration of online and bricks-and-mortar retail. With Whole Foods and amazon.ca under its belt, Amazon will be able to dominate the Canadian retail market in its entirety. This underlines a need to strengthen e-commerce initiatives, including home delivery options, product selection, and delivery speed.

 

This buyout also brings even slimmer profit margins to the table. Because Amazon’s business model leaves it with a net income of nearly zero each quarter, a Whole Foods operating under the giant will accept lower margins than it does as an independent chain. This will ultimately drive their prices down, making it incredibly difficult for independent retailers to compete. To fight this, independent grocers must continue to offer unique services, strong client-grocer relations, and a wide range of fresh, attractive products.

 

The transaction is expected to be finalized at the end of 2017.