Amazon, Walmart make acquisitions
Whole Foods deal called ‘transformative’
NEW YORK - The highly competitive U.S. retail landscape was reshaped Friday with dual announcements of acquisitions by Amazon and Walmart.
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.
Meanwhile, Walmart announed Friday it is buying menswear online seller Bonobos for $310 million, intensifying retail competition with Amazon on the same day its rival announced its blockbuster deal.
Amazon will be able to use automation and data analysis to draw more customers to stores while helping Austin, Texasbased Whole Foods cut costs — and perhaps prices — and better tailor its offerings to customers.
It also 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.”
Whole Foods operates three locations in Wisconsin, including shops in Milwaukee, Wauwatosa and Madison.
Amazon already offers grocery-delivery services in five markets, but analysts say expansion is tough because its distribution centers are set up for dried goods, not perishables. Just two years ago, Whole Foods CEO John Mackey told Bloomberg BusinessWeek 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.
Amazon will use technology (automation and data) to save Whole Foods, while Whole Foods will improve Amazon distribution — not just for groceries but other stuff as well. For customers, this could mean better prices and delivery options.
“Dominant players like Walmart, Kroger, Costco and Target now have to look over their shoulders at the Amazon train coming down the tracks,” O’Shea said.
The Amazon announcement overshadowed Walmart’s move to acquire Bonobos Friday.
The Bonobos purchase reflects Walmart’s bid to grow its customer base into niche areas where its stores are not as strong. The company said it would offer Bonobos brands through its recently acquired Jet.com division and “possibly other Walmart brands in a variety of countries over time.” Bonobos has 35 physical stores.
“Bonobos is a brand with loyal customers, premium price points, and expertise in a differentiated niche,” said Stephen Beck, managing partner of management consultancy cg42. “It attracts exactly the kind of buyer who does not frequent Walmart today.”
In recent months, Walmart has begun to offer free two-day shipping for a minimum purchase of $35, and sought to leverage its network of locations by offering a discount on thousands of online-only products if customers are willing to pick them up.