Amazon expands into grocery stores

Amazon looks set to develop its grocery activities in the UK as well as the US

Amazon’s plans to acquire US organic retailer Whole Foods Market in a £10.8bn ($13.7bn) deal announced last month, has sent shockwaves through the grocery sector as it foreshadows further expansion of the online retailer into the UK multiples’ traditional ‘bricks and mortar’ area of business.

“This is the clearest indication that Amazon intends to be a serious player in grocery retail – and is a significant wake-up call for grocery retailers in North America and the UK,” said Harsha Wickremasinghe, a food and drink specialist with mergers and acquisitions firm Livingstone Partners.

“It also highlights that Amazon clearly believes that in order to achieve long-term success in the grocery category, it is essential to have a bricks-and-mortar presence.”

Wickremasinghe said Amazon was known to be scouting for prime central London locations as part of its move into grocery retail in the UK.

‘Nine supermarkets in the UK’

“Exactly 12 months since the launch of Amazon Fresh in the UK, and in one fell swoop, the online giant will now have nine supermarkets in the UK – seven of which are London-based,” he added.

“Whole Foods’s proposition also has an excellent fit with the typical London-based Amazon Prime Customer. The UK grocers have downplayed Amazon’s impact on their sector to date, but this latest move should have them genuinely looking over their shoulder.”

Jonathan Buxton, a partner and head of retail at Cavendish Corporate Finance, took a similar view.

The acquisition of Whole Foods is the online giant’s largest deal to date and demonstrates Amazon’s ongoing commitment to building a presence in the grocery market. The scale of the deal has already sent grocery stocks reeling and is likely to cause disruption in the wider retail industry,” he said.

“This deal is a signal of Amazon’s continued commitment to the grocery industry and follows the launch of the now established Amazon Fresh delivery service, and its recent supply deal with Morrisons. The acquisition of the organic grocer is Amazon’s second foray into bricks and mortar and follows reports from last October that Amazon was planning on building its own grocery stores.”

‘Chain of cashier-less fresh food stores’

E-commerce delivery specialist ParcelHero suggested the deal between Amazon and Whole Foods Market could lead to a chain of cashier-less fresh food stores.

“Amazon is certainly getting fresh about fresh produce,” said ParcelHero’s head of consumer research David Jinks. “It has done a deal with Morrisons to deliver online produce in the UK and is now very successfully delivering fruit and veg within the hour in a number of UK and US cities. The purchase of Whole Foods Market offers a huge new opportunity.”

Jinks added that Amazon was understood to be developing cashier-less stores in the US and trialling them in Seattle.

“A chain of automated Whole Foods stores, in the US and here in the UK, might prove attractive to busy younger shoppers,” he said.

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