When Amazon announced its plan to buy Whole Foods for a massive US$13.7 billion, to say that the news took the retail industry by surprise would be an understatement. Soon after the news hit the stands, Target shares dropped 5 per cent, with Costco, Kroger, and SuperValu reporting similar declines of 7%, 9%, and 14% respectively.
As per the terms of the deal between Amazon and Whole Foods, as many as 460 stores across 43 states in the United States will be picked up by Amazon, many of which are located in major, affluent areas. Most industry experts feel that the question is not whether the leader in ecommerce will take over the retail industry with its brick and mortar presence, but rather when. A lead partner at consulting firm A.T. Kearney, Greg Portell said that Amazon has revolutionized the definition of retail. The company is putting its money where its mouth is by creating a seamless and boundaryless retail environment.
Discount Retailers to Pay the Price of Amazon’s Takeover
Analysts believe that discount retail stores such as Target will be the ones bearing the brunt of this shocking move by Amazon. The big-box retailer has, over the years, been struggling to roll out a grocery strategy that is successful. As of now, Target, by no means, earns its bread and butter through its grocery division; this category in fact, accounts for just about one fifth of the annual sales. Grocery has been sort of an afterthought for Target ever since its debut and has been more of a convenience for shoppers who are already there to pick up home décor, apparel, or cleaning supplies. However, Target chief executive officer Brian Cornell had earlier admitted that the firm needed a new grocery model. But with Amazon’s latest deal, looks like the ecommerce giant is moving in on Target’s turf.