Whole Foods bought by Amazon

Amazon buying Whole Foods in bold move into brick and mortar

NEW YORK » Online retail giant Amazon is making a bold expansion into physical stores with a $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else.

Amazon will be able to use automation and data analysis to draw more customers to stores while helping Whole Foods cut costs — and perhaps prices — and better tailor its offerings to customers.

Amazon, meanwhile, will be able to use hundreds of Whole Foods stores as distribution hubs — not just for delivering groceries but as pickup centers for what customers order online.

“The conventional grocery store should feel threatened and incapable of responding,” Wedbush Securities analyst Michael Pachter said.

Moody’s lead retail analyst Charlie O’Shea said the deal could be “transformative, not just for food retail, but for retail in general.”

Tough times for Whole Foods

Amazon already offers grocery-delivery services in five markets, but analysts say expansion is tough because its current distribution centers are set up for dried goods, not perishables. Just two years ago, Whole Foods CEO John Mackey told Bloomberg Business-Week that Amazon’s foray into grocery delivery would be “Amazon’s Waterloo.”

But it was Whole Foods that fell behind as shoppers found “good enough” alternatives to the organic and natural

foods it helped popularize.

Founded in 1978, Whole Foods has seen its sales slump and in February said it no longer saw the potential for expanding its flagship chain to 1,200 locations, up from about 460 in the United States, Canada and the United Kingdom.

It also had announced a board shake-up and costcutting plan amid pressure from activist investor Jana Partners.

Groceries are already a fiercely competitive business, with low-cost rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first U.S. stores just this week. Whole Foods itself had launched an offshoot

chain named after its “365” private label brand in a nod to the popularity of no-frills chains.

The Amazon-Whole Foods combination could put even more pressure on those chains and other big grocery sellers. Walmart, which has the largest share of the U.S. food market, has been working on lowering prices, while Target has been struggling to turn around its grocery business.

THE ASSOCIATED PRESS A shopper at the Greenmarket at Union Square walks through the market carrying a bag of groceries from the Whole Foods grocery store on the other side of the square in New York. Online juggernaut Amazon announced Friday that it is buying Whole Foods in...