Amazon-Whole Foods tie-up could speed grocery transformation

Amazon expects to reduce headcount and change inventory to lower prices and make Whole Foods competitive with Wal-Mart Stores and other big-box retailers, according to a person with knowledge of the company's grocery plans.

When Consumerist asked Instacart how the news of Amazon's acquisition of Whole Foods could affect the company's current relationship with the grocer, a spokesperson told Consumerist that Instacart has been "committed to helping grocers compete online" from the beginning.

Walmart, which has the largest share of the USA food market, has already been pushing harder into e-commerce to build on strength in its stores and groceries.

Whole Foods has made some overtures to lower prices over the years, such as launching a handful of smaller stores stocked with mostly store brands under the "365 by Whole Foods Market" banner.

While according to Rafael Romero of CREC's retail division, "I don't think that this will be the last of Amazon's purchases", and "They fully recognize that brick and mortar and online retailing is all retailing and you need both". Amazon might also be partial to companies whose retail footprints can easily double as Amazon order pickup locations and/or showrooms for the company's products.

It's not yet clear what specific changes are in store at either Amazon or Whole Foods, since the two companies are saying little about their plans. "We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer".

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In May, under pressure from Jana Partners, Whole Foods replaced five board members and its chief financial officer. As consumers also look for fresher foods and more organic and natural offerings, shelf space in the supermarket center aisles, long dominated by big brands like Kellogg, Kraft Heinz and Campbell Soup - is also simply shrinking.

Ladd, who left Amazon in March, said Amazon will seek to eliminate checkout lines by using technology that automatically scans goods as customers add them to their shopping carts.

Are the days of Whole Foods being dubbed "Whole Paycheck" on the way out?

Some industry observers say Amazon will find it hard to use Whole Foods to pull away Wal-Mart shoppers because the two stores appeal to different customers. Numerous traditional retailers have experienced a significant decline in their business due to this phenomenon.

"Many will do anything to either make this acquisition more costly for Amazon, or prevent the asset from landing in Amazon's lap", Short wrote in a note to clients. "Now, Amazon can offer the critical ability to touch, see, hear and smell groceries, while creating a localized, national delivery network for better, fresher food, fast". But a few other things might change eventually, as Amazon seeks to change its new spouse's reputation for pricey products.

Like groceries (and perhaps even moreso), home improvement retailers sell a lot of items that aren't easy to cost-effectively ship to homes via UPS and FedEx. Whole Foods could also become "Whole Foods by Amazon", or some other derivative. He feels that Amazon's push into consumables, Costco's own fading fundamental catalysts, and real-world rival Wal-Mart's (NYSE:WMT) push into online initiatives will cap Costco's near-term upside. Amazon recently started producing private-label food.

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