Amazon and Whole Foods: Together Forever

In the middle of June 2017, online retailing giant Amazon announced a deal to purchase Whole Foods for $13.7 billion.

This move came as a bit of a surprise. Earlier in the year Amazon whet the appetites of technologists across the globe when they released a promotional video for their own physical grocery stores – featuring shoppers browsing the shelves for sandwiches and other treats before walking out of the store, confident in the knowledge that Amazon’s sensors and systems were capturing their purchases and billing them automatically.

amazongoods1

Source: The Business Journals

That video, which now has more than 9 million views on YouTube, was exciting – representing a whole new world of possibilities when it comes to a frictionless grocery shopping experience.

So why did they buy Whole Foods?

Whole Foods Decline

Whole Foods was suffering. In October 2013 their share price peaked at $65 a share. By March of 2017, the share price languished at around $30 a piece. A company with sales of organic foodstuffs of $43 billion in 2015 started to see customers abandon ship as other grocers started offering organic offerings at cheaper prices. Whole Foods even launched a new chain of stores, branded under the 365 name, to compete with the low-cost organic grocers.

Put simply, Whole Foods faced a sales slump the likes it had never seen in a decade – with six straight quarters of declining same-store sales ( the standard by which the industry is judged).

Ambitious plans

Amazon is the king of e-commerce. According to an analysis by Slice Intelligence, 43% of all online US retail sales went through Amazon in 2016. They aren’t stagnating either. In 2015 Amazon had 33% of all US online purchases.

However while Amazon continues to dominate online retail we have to remember that e-commerce represents just 12% of all retail purchases. Given that total e-commerce sales were around $400 billion in 2016, that means there’s a roughly$3.4 trillion dollar pie that Amazon has yet its grubby mitts on.

If you ask us, that sounds like ample motivation to establish a physical presence!

amazongoods2

Match made in heaven

So you take an e-commerce giant who wants to get into the physical shopping arena and you get this $13.7 billion deal. By buying Whole Foods, Amazon gets access. $13.7 billion gets them more than 430 stores in the US, Canada and UK and locations in all but 8 US states. Buying Whole Foods instantly turns Amazon into a top 10 grocery chain.

amazongoods3

Source: Perficient

That’s a big deal, and that’s even before taking into account what Amazon is really good at: data.

Whole Foods’s network of stores is an interconnected web of customer data that Amazon can collect, store and analyze as they simultaneously optimize and perfect their grocery offerings. Amazon can leverage their expertise with data in order to trim all the fat from Whole Foods as a grocery service.

The acquisition also is a revenue generator. Yes, Whole Foods is struggling as of late but they still made half a billion dollars in profit in 2016. Their margins are higher than Amazon’s (5% vs 3%) and the customer base is largely made up of the affluent upper-class.

Who knows, Amazon might even implement parts of their frictionless grocery service into select Whole Foods locations as a type of pilot program. It would be a quick way to test the offering, and the vast amounts of data that testing in say, 10% of their stores would generate would only serve to fine-tune and refine their machine learning algorithms further.
Amazon has long reigned online – now it’s time to conquer the physical world.

amazongoods4

Save

Save

January 2, 2021 Update: We have just announced our BEST STOCK NEWSLETTER of 2020 AWARD!

CLICK HERE to find out which stock newsletter was up 78% in 2020 (and whose 2019 picks are now up 113%).

*** Our Award for BEST STOCK NEWSLETTER of 2020 ALERT ***

Updated January 2, 2021

At WallStreetSurvivor, we subscribe to dozens stock recommendation and advisory newsletters. There is ONE newsletter that is constantly outperforming all of the others--The Motley Fool Stock Advisor.

Five of their 2020 stock picks have doubled and the average return of all 24 of their stock picks for 2020 is up 78%!

We have been tracking ALL of the Motley Fool stock picks since January 2016. That's 5 years and 120 stock picks. As of Friday, January 1, 2021 the Motley Fool's January stock pick (TSLA) is up 720%, their March pick (ZM) is up 172%, their April pick of SHOP is up 226% and their June pick CRWD is up 120%; and another two have more than doubled. In addition, 10 of their 2019, 12 of their 2018, 11 of their 2017, 15 of their 2016. Most impressively, over the last 5 years that we have been tracking every recommendation, their average stock pick is up 209%--tht means over the last 5 years their stock picks, on average, have TRIPLED!

Now no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super-profitable. The important thing about the Fool stock picks is you have to buy them the day they are recommended because they usually pop 5-10% in the first 72 hours after the release their recommendation. You sure don’t want to risk missing out on their next pick.

Normally the Fool service is priced at $199 per year but they are currently offering a NEW SUBSCRIBER DISCOUNT that allows you to get theiir next 24 stock picks for just $99/year. HERE is the LINK to visit their New Subscriber Discount page.

CLICK HERE to get access to all The Motley Fool’s Stock Picks and their next 12 months of picks for just $99 per Year! 



GET UP TO $1,000 IN FREE STOCK

WHEN YOU OPEN A ROBINHOOD BROKERAGE ACCOUNT

Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.

Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.

Claim your free stock NOW (before it’s too late)



Comments are closed.