Amazon dominated the headlines in June when they purchased Whole Foods Market for $13.7 billion. It seemed out of character for the company, which has always existed as an online marketplace. The idea of a brick and mortar store, although previously established, being connected to Amazon seemed strange. Many people were really surprised by the acquisition, but if you look at the reasoning behind it you can see why Amazon saw this as a worthwhile investment.
Amazon is always looking for distribution points!
First, I think Amazon is always looking for distribution points to be able to provide customer fulfillment and operational support. They’re dealing with things on such a large scale all the time. Having Whole Foods provides them with a new source of support for their customers. In addition to food, Whole Foods are now carrying the Echo product line in certain stores and tieing the rewards program into Amazon Prime. Some stores also have Amazon Locker set up, bringing customers into pick-up their online purchases and potentially leading them to purchase groceries in the process.
Bloomberg: Amazon cuts Whole Foods prices as much as 43% on first day.
Whole Foods as a business has tons of untapped potential. For example, while many in the grocery industry have started providing delivery Whole Foods has been behind. The company had been struggling prior to Amazon, and customers were just not turning out like they used to. Amazon saw the problem and considered the future possibilities. Developing a delivery service with Whole Foods fit perfectly with Amazon’s entire philosophy and brand. Whole Foods products are now available on Amazon’s website, and customers can include those groceries with their AmazonFresh delivery orders. The additional access to support and potential for delivery is enough to make the billions they spent a worthwhile investment. In fact, Amazon’s shares are up over 31% this year, in large part due to the Whole Foods purchase. They plan to continue integrating themselves further, developing new POS systems that could potentially offer more Amazon products in-store.
Amazon took a struggling retailer and transformed it. What might have seemed out of character at first is actually part of Amazon’s bigger picture to involve itself in every aspect of people’s lives. Taking some risks and enacting change is why Amazon is so successful, and their wide vision is something everyone should try to emulate.
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