Business

Amazon-Whole Foods deal expected to pay off for South Sound shoppers

Whole Foods in University Place is just one of the stores included in Amazon’s $13.7 billion acquisition of the grocery chain.
Whole Foods in University Place is just one of the stores included in Amazon’s $13.7 billion acquisition of the grocery chain. Staff file, 2016

Who knew it would be so easy to get an Amazon grocery store here — and pretty much everywhere?

The online retailer announced Friday that it was buying Whole Foods for $13.7 billion, the largest acquisition in Amazon’s history.

And just last week we were bemoaning how hard it was to get another Trader Joe’s in Pierce County.

Friday’s grocery bombshell should come as no surprise.

Whole Foods has been struggling the past few years as more grocers move into the specialty foods market, with Kroger’s Main & Vine in Gig Harbor (the chain’s only store in the United States) the most prominent local example.

And Whole Foods has always grappled with the “Whole Paycheck” moniker given by consumers who believe its prices were too high.

Industry experts expect that to change rapidly.

“Amazon can be expected to work to deliver better value to grocery customers, both online and within the brick-and-mortar space,” Bankrate.com senior economic analyst Mark Hamrick said in a news release just after Friday’s news broke.

The deal is set to close later this year. It gives Amazon more than 400 established brick-and-mortar stores in the United States, Canada and the United Kingdom.

Whole Foods opened its University Place store in 2015. At that time, people were walking into the store two weeks before it opened, so eager were they to start shopping.

Imagine that store now that Amazon will be involved.

“This is an earthquake rattling through the grocery sector as well as the retail world,” Hamrick said. “We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer.”

Mark Huson, a director in West Monroe Partners’ mergers and acquisitions practice in Seattle, had a similar take.

“Amazon has been a major driver of the Seattle/Tacoma region’s expansion for several years,” he told The News Tribune. “Expanding the range of products available through Amazon Fresh will only lead to more growth for that business (new cities, new customer segments), in turn leading to more growth for our region.”

Which calls to mind Bentonville, Arkansas-based Walmart, which just graduated its first class from its Bonney Lake career academy this week, one of three such sites in Amazon’s home state.

Walmart made news of its own Friday, announcing it was buying online clothing company Bonobos for $310 million. Months earlier, Walmart paid $3.3 billion for Amazon online retail competitor Jet.com, which is also aggressive in online grocery retail.

“Our customers are looking for shopping experiences that provide everyday low pricing and a mix of physical and digital channels that work best for their needs,” Walmart said in an emailed statement to The News Tribune.

“We feel great about our position, with more than 4,500 stores around the country and fast-growing e-commerce and online grocery businesses.”

Walmart is also working on growing its “order online, pick up at store” option for groceries, with plans to expand to 1,000 stores this year nationwide.

Online grocery ordering and on-site pick-up has been a feature Fred Meyer has expanded in the area, with the Lacey Fred Meyer to join its “ClickList” program June 21. South Hill, Federal Way area and Kent stores already offer it.

That doesn’t mean this is an easy time for the retailer, or Safeway, who will deliver groceries to your door in many areas.

Even before Friday’s announcement, Kroger stock on Thursday “posted a double-digit decline amid food price deflation and stiff competition in the grocery space,” analyst Hamrick said. “For it and other long-existing players in the space, they have to be wondering whether a competitive time bomb has begun clicking.”

Kroger, in an emailed statement Friday, said:

“Our associates have a relentless focus on our customers that has enabled Kroger to compete and win in an ever-evolving landscape for more than 134 years. As we’ve done in the past, we will evolve our business to deliver what our customers want and need today and into the future. We expect to continue to gain share and deliver value for our customers and shareholders.”

Huson thinks that, for now, Kroger and Safeway have things well in hand.

“Whole Foods is aimed at a different segment of the population than traditional supermarkets like QFC (Kroger) and Safeway,” he said. “As such, it may have relatively little impact on those traditional grocery chains’ core businesses in the near-term.”

And the future?

“In the longer-term, however, leveraging Amazon’s distribution network to sell Whole Foods products could generate enough efficiencies to lower the cost of those products — thereby expanding Whole Foods’ addressable market and eroding traditional grocers’ customer bases,” he noted.

The Whole Foods brand will be retained along with, at least for now, John Mackey, the grocer’s CEO.

“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” Jeff Bezos, Amazon founder and CEO, said in a statement.

“Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades — they’re doing an amazing job and we want that to continue.”

The Seattle Times and The Washington Post contributed to this report.

Debbie Cockrell: 253-597-8364, @Debbie_Cockrell

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