Two of the most well-known names in American retail have come together as Amazon buys out Whole Foods supermarket for $USD13.7 billion.
The deal sends shock waves across both the online and brick-and-mortar industries.
Grocery chains plunged on Friday -- Wal-Mart Stores fell as much as 7.1 percent, while Kroger Co. tumbled 17 percent -- as investors worried that woes will mount in the increasingly cutthroat industry.
Whole Foods is known to specialise in organic, natural products and employes just under 100,000 staff.
Analysts think the impact of this purchase will be to drive down prices and dent profit margins for rivals, as well as transforming Whole Foods’ in-store experience as Amazon really gets to work on it.
It’s expected that Amazon will integrate Whole Foods’ inventory and online ordering into grocery services like AmazonFresh and Prime Pantry.
In the meantime, Amazon Prime customers may start to see Whole Foods products in the AmazonFresh lineup, including the grocers’ prepackaged meals, which make up about 20 percent of Whole Foods’ sales now.
Although an unlikely match for the two mega chains, Amazon has been slowly making its way into the brick and mortar scene, even opening physical book store.
Retailers based in Australia worried when the online giant expressed its plans to open in the country, marking the first move over to any pacific region.
The acquisition of Whole Foods for USD$13.7 billion its Amazons largest deal, with the buyout of Twitch, an online streaming video game site, for just USD$970 million coming in second.
CEO Jeff Bezos had a jump in wealth by USD$10 billion over the past two months.
The collaboration of these two retail giants means more exciting opportunities for the two companies.
Analysis expect AmazonFresh, the food delivery side of the site, to be able to benefit the growth of Whole Foods delivery arm.
AmazonGo patented concepts of cashier-less checkouts, and following that ‘check-out free checkouts’ as people walk out of the store as their iPhone tracks their items and paid for them.
Amazon is also eyeing new areas. On June 15 Bloomberg report had it eyeing a $US9 billion bid for Slack, the maker of a trendy chat app that companies use for in-house discussion.
If the deal does not go through, then Amazon will have to pay a $USD400 million breakup fee, but in Bezos case that is just under five percent of his total worth.
Since the announcement of the deal, Amazon shares jumped 3.3 percent, pushing its market capital to $USD470 billion.
Unfortunately the chain has no plans yet to move into the New Zealand market.