Amazon's Whole Foods Market acquisition to close Monday

Amazon vs Google ecommerce search

"It's all about speed, speed, speed". Amazon has more than 60 million Prime members, according to analyst estimates.

While the news may be greeted enthusiastically by shoppers, it is striking fear into the hearts of competing supermarkets and the Wall Street analysts who follow them. Kroger shares were down eight percent yesterday, and Walmart shares fell two percent yesterday as well. Amazon Prime is a $99-a-year service that gives customers faster free shipping, video streaming and other benefits.

In addition, AmazonFresh, Prime Pantry, and Prime Now will begin selling Whole Foods Market's private label products, including 365 Everyday Value, Whole Foods Market, Whole Paws, and Whole Catch.

But what does this merger mean for the rest of the grocery industry? In the 1990s, the company tussled with Barnes & Noble to see which could discount books the most.

Beginning Monday, Whole Foods will slash its prices on "a selection of best-selling grocery staples", said chief executive of Amazon Worldwide Consumer Jeff Wilke.

Still, the speed with which Amazon completed the acquisition and embarked on a price-cutting campaign is stunning. Here an Amazon customer will be able to pick up any Amazon order, while purchasing organic produce. It promised there would be further cuts in the future. "This has been a perennial problem for Whole Foods with no good solution". The company's prices are about 15 percent higher than at the average grocery store, according to Morgan Stanley.

Expect to see savings on some of Whole Foods' most popular items like salmon, avocados, baby kale, almond butter, bananas, eggs, ground beef, rotisserie chicken, butter and apples.

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Increasing competition in the grocery space spells big trouble for Wal-Mart, trader David Seaburg argues.

And - significantly for the parcel delivery industry - Amazon announced that Amazon Lockers will be available in select Whole Foods Market stores.

"That's the thorny problem Amazon faces: How do you become a low-cost supermarket and still retain that cachet?" said Jeffery Inman, a marketing professor at University of Pittsburgh and president of the Society of Consumer Psychology. The deal will be closed on Monday the 28th.

Amazon announced plans to buy Whole Foods in June.

Not everyone is concerned about the Amazon impact, however.

"By working together with Amazon and integrating in several key areas, we can lower prices and double down on that mission and reach more people with Whole Foods Market's high-quality, natural and organic food", says John Mackey, Whole Foods Market co-founder and CEO. "Longer term, they know Amazon's deep cuts will lead to more shoppers".

The acquisition also shows Amazon's continued expansion of Prime. Walmart, the largest grocery seller in the country, saw a 2 percent drop. The grocery chain, which has fought the "Whole Paycheck" reputation, had been under shareholder pressure to improve results as customers moved on and discount chains like Lidl and Aldi expanded in the U.S. "But at the end of the day, you just have to try and get the freshest corn out there on the sidewalk".



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