Amazon Buys Whole Foods Market Inc – Supermarkets Watch Out!

On Friday, Amazon announced (subject to shareholder and regulatory approvals) the acquisition of Whole Foods Market Inc, a major US-based grocery retailer. Whilst it is not such big news here in Europe as it is in the States, investors saw it as important enough to drive a drop in the share price of firms such as Tesco and Sainsburys by some 4-5% on Friday. Amazon has had a huge effect on retailers in sectors such as books and music; will it do the same in the grocery industry?

Whole Foods is an organic, up-market, high-quality, high-price chain with 431 supermarkets in the US. Amazon has bid $13.7 billion at $42 per share, a 27 percent premium to the Whole Foods previous closing price.  There are only 9 stores in the UK, and the history has not all been positive in trading terms. 7 are in and around London, plus Glasgow and Cheltenham.

The implications for the consumer business are clear, but we are more interested here on what it might mean for the Amazon business-to-business future. We reported here on the launch of Amazon Business in the UK a couple of months back, and this move might open up further opportunities for the firm at the intersection of business and consumer buying.

We will be keeping a close eye on this, but as a start, we can only suggest you take a look at the excellent article published last week by our colleagues in Spend Matters US, Jason Busch and Pierre Mitchell. In their piece, 5 Quick and Crazy Ideas About What Amazon’s Acquisition of Whole Foods Means for the Intersection of B2B and B2C you can read 5 not really very crazy at all thoughts on the future.

Here is a sample, but do read the whole article here.

  1. The Death of Brands

"The death of brands" is widely becoming a reality, at least in B2C. Amazon is a major contributor to the reduction (some might argue full elimination) of branded products in decision-making. Consider now that there are no major brands at Whole Foods, aside from its own label.

Now imagine this notion of the demise of brands extending to B2B, as well, a trend that one could argue has started already in earnest as data on supplier performance, quality and, of course, more transparent pricing contributes to decision-making in increasing disproportion to “trust” founded on past relationships alone.

Whole Foods provides a fascinating test case for developing trust around a store or brand versus branded products. In many cases, business buyers “shop” for catalog-based SKUs through distributors based on coverage and consistency across brands -- especially for tail spend areas.

Amazon’s owning of “trusted” brands such as Whole Foods will no doubt lend credibility to those that shop for B2B needs, too, as brand loyalty changes and “in data we trust” continues to replace “in brand we trust” in B2B buying decisions. Amazon, of course, also already provides analytics on spending, suppliers and other metrics to Amazon Business customers.

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