Seattle love, dread of activist investor help clinch Amazon M&A roles

Jun 20, 2017, 00:28

Amazon already offers a home delivery service for groceries in certain markets.

"The conventional grocery store should feel threatened and incapable of responding", Pachter said.

Marc Perrone, head of the United Food and Commercial Workers International Union, which represents millions of grocery workers, said that Amazon's "brutal vision for retail is one where automation replaces good jobs".

Drew Herdener, a spokesperson for Amazon, told The New York Times that Amazon has no plans to use this technology to replace the jobs of cashiers at Whole Foods, and no other jobs will be impacted as a result of the deal.

Mackey helped grow the company from a tiny health-conscious grocer in Texas into a giant in upscale chain in all but eight U.S. states.

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Whole Foods has more than 460 stores in the United States, Canada, and the United Kingdom. Investors are likely anxious that Amazon, once entrenched in the physical grocery store business, will ruthlessly cut prices for food products like it did with books. It won't be the big loser once Amazon swallows Whole Foods, Livingston said.

The Amazon-Whole Foods combination could put even more pressure on rival grocery chains and other big grocery sellers.

Amazon could have built up its groceries business without acquisitions, but that would have been costly and time-consuming, said Neil Saunders, managing director of GlobalData Retail.

The "implications ripple far beyond the food segment, where dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks", O'Shea said.

That, in turn, could help Amazon do better with pricing and promotions, branding and the overall store experience, said Robert Hetu, a retail analyst at Gartner.

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Despite Amazon's reputation for harnessing technology, a prototype store inside its corporate office in Seattle, called Amazon Go, which uses sensors and tech-savvy cameras to detect shoppers' selections and then charge their Amazon accounts, has rolled out more slowly than planned, a person familiar with the matter said. Pachter said Amazon might get customers over those fears if they know the delivered items are the same as those they would find at the local store. He's got professional respect for Amazon for how efficiently and successfully it runs its business.

Hartmann said he expects the online retailer to introduce some efficiencies to Whole Foods' operation. These three have begun offering some of what Whole Foods offers, forcing the supermarket chain to cut prices.

The deal unfolded after Jeff Bezos, Amazon's chief executive officer, approached Whole Foods CEO John Mackey about a month ago and received an eager response from Mackey, two people familiar with the matter said. The stores could teach cooking skills, hold classes and educate about food.

Barclay's analyst Karen Short today noted that another offer could be placed on the table for Whole Foods, prompting her to raise her stock price target for Whole Foods to $48 per share. "More customers are concerned about price and value, and that has a material impact on profitability".

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