Amazon Buys Whole Foods Market for $13.7 billion

Amazon has been incrementally moving into the “real world” for several years, with Amazon Lockers, AmazonFresh, Amazon Go and several physical bookstores. There was even speculation that the company might buy American Apparel.

Now, in a move that surprised me, Amazon announced that it’s buying Whole Foods for nearly $14 billion:

Amazon and Whole Foods Market, Inc. today announced that they have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market’s net debt . . .

Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world. John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas.

Completion of the transaction is subject to approval by Whole Foods Market’s shareholders, regulatory approvals and other customary closing conditions. The parties expect to close the transaction during the second half of 2017.

Whole Foods had been struggling recently with stagnant growth and a potential sale had been speculated. The fact that it’s Amazon and not private equity or another grocery giant is significant. Amazon can now use the more than 400 Whole Foods locations as a base or distribution point for many of its services including AmazonFresh. One could easily imagine an “Amazon store” within larger Whole Foods markets.

It remains to be seen whether or how this affects the company’s Amazon Go strategy. Amazon Go promised a reinvented convenience store/grocery shopping experience. It’s unlikely that Amazon will “convert” Whole Foods markets into Go experiences — the Whole Foods brand is being preserved — but it could “Go-ify” the chain in several ways. Regardless I think we’ll see more technology being used in the stores for sure.

In the near term it’s likely that nothing will change. However I would expect innovation in the customer experience at Whole Foods (online and offline) over the coming 24 – 36 months.

We’d be interested in your thoughts. What do you think this means for Amazon, for Whole Foods and for the future of retail?

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