Wouldn’t it be nice to have fresh groceries delivered to your door? Or, failing that, to within a mile of your home? Amazon’s purchase of a grocery store chain could improve food delivery in the Midwest.
Food is Amazon’s final frontier, according to David Portalatin, an industry analyst with NPD Group, a market research company. On Friday, Amazon announced it will purchase Whole Foods for $13.7 billion.
“Figuring out how to get (fresh food) to your front door is the ultimate in convenience for consumers,” Portalatin said. “In order for Amazon to get the volume growth they are looking for, fresh foods has to be part of the equation. This deal gives them credibility with consumers and a major foothold in that space.”
Amazon Go, an entirely automated grocery store where items removed from the shelf are automatically logged in a virtual shopping cart and payments are made via an app as you leave, is another area of food technology that Amazon is developing.
Whole Foods, with stores in Overland Park and Olathe, makes up a small market share in the Kansas City area. In 2016, a survey of 2,000 adults found that less than 1 percent purchased most of their groceries from the chain and about 4 percent had shopped there in the past week.
Whole Foods’ stock soared after the announcement. It was up 27 percent from Thursday to Friday morning, according to the Washington Post. Amazon’s stock also saw a 3 percent bump, and stock prices for other grocery chains plummeted following the announcement.
Nationally, Amazon dominates the e-commerce market. Forty-two percent of consumers bought something from Amazon last year, according to The NPD Group, a market research company. Sixty percent of millennials are Amazon consumers.
The company’s purchase means they gain control of 431 Whole Foods stores. “Those stores solve much of Amazon’s ‘last-mile’ delivery challenge for fresh groceries — which is arguably the biggest single reason that Amazon has not been able to make a dent in the grocery shopping of the 60 percent of millennials who already buy other items from Amazon,” the NPD Group said in a release.
Last-mile delivery has long been a challenge to fresh food delivery — fresh veggies, fruits and meats can’t sit on a doorstep for long before rotting, and a delivery person works slower delivering to a number of houses spread out over a given area rather than delivering to a single location.
Slate writes that the purchase of the brick-and-mortar grocery stores is a way for Amazon to “truly enter the food and beverage retail business.” Dennis Berman, a financial editor with the Wall Street Journal, tweeted that Amazon didn’t just buy Whole Foods stores. “It bought 431 upper-income, prime-location distribution nodes for everything it does.”
One day before its announcement, news broke that Amazon had acquired a patent to prevent in-store comparisons of grocery prices. The patent is for a mechanism that allows a retailer to “intercept network requests like URLs and search terms that happen on its in-store Wi-Fi, then act upon them in various ways,” The Verge reported.
It is unclear how the acquisition will affect the Whole Foods store expected to open in 2018 at 51st Street between Brookside and Oak, near the University of Missouri-Kansas City.