Amazon’s bid for Whole Foods sparks speculation
What might be gobbled up next?
Amazon’s surprise announcement last week that it would buy Whole Foods Market for $13.7 billion sent rival grocery stocks plummeting. It also unleashed a flurry of speculation about the retail behemoth’s next move.
“Could GrubHub be Amazon’s next big purchase?” asked the website Consumerist.
“Amazon’s next acquisition target could be Nordstrom,” declared Inc. Magazine.
“Amazon might go after Lululemon or Warby Parker next,” said cable business channel CNBC.
Shares of CVS, Walgreens and RiteAid also fell after the deal was announced as drugstore chains feared that the online giant could be heading their way next, making inroads into the highly regulated prescription-retail and pharmaceutical businesses.
In other corners of the Internet, analysts and investors speculated that Seattle-based Amazon could be setting its sights on organic grocer Sprouts, discounters DollarTree and Dollar General, and usedgoods purveyors such as Plato’s Closet and Once Upon a Child.
The Whole Foods deal, analysts said, signalled that Amazon — which until now had focused mostly on scooping up niche businesses and technology startups — is serious about buying established bricks-andmortar businesses.
“Amazon has opened Pandora’s box by showing a willingness to spend billions of dollars,” said Tom Forte, managing director of Maxim Group, an investment banking firm in Manhattan.
“Now analysts like myself can have fun making speculations on what types of acquisitions are next.”
Forte, for his part, has outlined 18 immediate opportunities for Amazon, including expansion into hardware stores, gas stations and pharmacies. But the most obvious targets, he said, are BJ’s Wholesale Club (which would come with a network of gas stations), Warby Parker( which could help Amazon get into the prescription eye glasses business) and Everlane( which has made a business being transparent about the pricing of its American-made apparel).
Amazon, founded in 1994 as an online bookseller, has since grown into a $136-billion-a-year company with a hand in nearly every aspect of e-commerce: groceries, apparel, streaming video, baby goods, electronics and more.
The company’s blockbuster announcement on June 16 roiled the plans of other companies like Blue Apron, which was preparing to go public soon, and stole the thunder of Walmart’s long-anticipated $310-million purchase of online retailer Bonobos, a deal announced the same day.
Amazon kept that momentum going Tuesday, when it announced it would expand its fashion business with Prime Wardrobe, an upcoming service that would allow customers to try clothing, shoes and accessories before paying for them. The service, which would compete with offerings from retailers such as Macy’s and Nordstrom, as well as subscription-type services, sent apparel stocks tumbling Tuesday.
But Brian Lee, an associate director at business-intelligence firm L2, said that much of the frenzy is an overreaction.
“The retail world is terrified, especially since the Whole Foods announcement,” Lee said. “But just because Amazon is getting involved in something doesn’t mean it’s going to be successful.”
He pointed to Amazon’s short-lived MyHabit flash-sales site as an example. His colleague, Sam Romanoff, added that Prime Wardrobe is not very different from similar services that are already available.
“They’re not providing anything new to an already oversaturated industry,” he said.
Plus, analysts said, Amazon tends to be slow and methodical in its acquisitions. Just because it offered billions for Whole Foods does not mean it is ready to snap up something else just yet.
“Historically, Amazon’s approach has been to build first, buy second,” Forte said, adding that the company has spent the last decade trying to build up its AmazonFresh delivery service. “It took years of trying groceries before they realized that it would be less expensive for them to just acquire a company like Whole Foods.”