Amazon buys Whole Foods

Venture Explains: Why did Amazon buy Whole Foods?

What’s happened? Internet retail giant Amazon has just agreed to buy high-end grocer Whole Foods for $13.7 billion.

What’s the motivation behind the deal? Even though it built its name in e-commerce, Amazon has recently been experimenting with brick-and-mortar stores, including a few that sell books. Now, after almost a decade selling groceries online without much success (people like to buy food they can see and touch), buying Whole Foods will give Amazon instant access to the $800 billion grocery market in the United States via the chain’s 460 stores, which have also spread to Canada and Britain.

What will this mean for Amazon’s competitors? Walmart, the largest grocery retailer in the United States, will almost certainly have to respond quickly to Amazon’s bold grab of its territory. Walmart has already acquired online clothes retailer Bonobos for $310 million in a deal widely seen as an effort to strengthen its online presence. “If Walmart loses the grocery battle to Amazon, they have no chance of ever dethroning Amazon as the largest e-commerce player in the world.” Brittain Ladd, a strategy and supply chain consultant who formerly worked with Amazon on its grocery business, told the New York Times.

Is Amazon getting too big? The company accounts for around half of all new spending online in the United States. Some are already for regulators to intervene because, even without the Whole Foods deal that will massively boost its retail footprint, Amazon has embedded itself in many other parts of the economy, such as cloud computing and entertainment.