Posted: August 26th, 2017
By: Abigail Jacobs*| Guest Writer
From its origin, Amazon has reinvented the way modern Americans conceptualize shopping. Products are not only cheaper than in stores, but consumers are able to receive shipments in a quick, efficient, and painless manner. Through its sales in books, electronics, groceries, and clothing, Amazon has become the modern form of retail. By allowing third-party sellers to market a variety of products online, Amazon has slowly encroached on the consistent business of brick-and-mortar retailers. In a radical business maneuver in June, Amazon announced its intention to purchase Whole Foods for $13.7 billion in cash. Amidst Amazon’s growth of services such as AmazonFresh and AmazonPantry, many wonder how the purchase will affect investors, third-party sellers, and competitors such as Blue Apron and Publix.
Amidst criticism and outcries against the acquisition on alleged antitrust issues, third-party grocery sellers on Amazon and small suppliers for Whole Foods wonder how their businesses will change. Some view the purchase as being “in complete alignment with Amazon’s view of the world of retail.” Critics question, why purchase Whole Foods, with high prices and selections tailored to particular dietary preferences, rather than mainstream chains such as Kroger? Many have sought to answer this question, but, perhaps, the most convincing theory is the overlapping of Whole Foods and AmazonPrime consumers. Data shows Whole Foods records approximately 8 million weekly customer visits and has 30 million customers. Analysts suspect that this consumer base “overlaps significantly” with Amazon’s base of 60 million domestic households. Some third-party sellers believe that consumers could have the option to “come into their local Whole Foods and pick up their entire Amazon order.” The threat to third-party sellers, however, is presented through the possibility of home delivery from local Whole Foods.
While third-party sellers on Amazon have received much of the spotlight, small suppliers for Whole Foods find the purchase to be a welcome change. With lowered sales in recent months, many suppliers “think the online behemoth’s entry into their business could be a good thing.” Amazon’s reputation for small business growth could provide even more business for small food companies selling their products in Whole Foods. Many of these suppliers, who shop on Amazon themselves, welcome the acquisition due to Amazon’s familiarity. Amazon’s sophisticated distribution channels provide a cost-efficient solution to “traditional [distribution that] eats away at profit for businesses.” Amidst the high hopes of Whole Foods small suppliers, critics look to Amazon’s history of shutting out small businesses. While the E-Commerce retailer provides products at a lower price, this often comes at a cost for producers, small businesses, and local retailers. Small suppliers with Whole Foods contradict this criticism by pointing to Amazon’s broader consumer base. Additionally, by “bypassing the shelf altogether,” small grocery providers may gain more customers and experience a growing demand for their products.
Ultimately, the implications of Amazon’s acquisition of Whole Foods are far-reaching and could permanently change the grocery market as we know it. If Amazon hopes to make home deliveries from Whole Foods, third-party Amazon sellers will need to find a way to reinvent their business in order to compete with small suppliers of Whole Foods. Meal providers such as Blue Apron will need to find retail partners in order to bring down “customer acquisition costs” and develop a more convenient and cost effective supply chain. While Amazon’s intentions have yet to be publicized, small businesses, Whole Foods providers, and Amazon third-party sellers eagerly await the upscale grocery chain will be transformation.
*Editor’s Note: Since this Article was written, the Federal Trade Commission approved Amazon’s acquisition of Whole Foods. The acquisition is expected to take place by the end of this year.