The acquisition of Whole Foods by Amazon has shifted
the dynamic of the organic food industry, putting even more pressure on ailing
retailers such as Walmart while adding more capital assets and broadening its
net margins
Amazon has
stolen a march over its brick and mortar competitor, Walmart, by purchasing
American organic food giant Whole Foods Market Inc. for $ 13.7 billion. The
nearly $ 500 billion company is expected to expand its existing 340,000+ workforce
by around 90,000 and add 400 physical stores to its e-commerce assets. Amazon
CEO Jeff Bezos’ vision of “selling everything to everyone” just got a huge
boost thanks to this acquisition. This acquisition puts Amazon firmly in the
driving seat for capturing a higher market share in the $700 billion U.S.
grocery sector. German discounters Aldi and Lidl are battling Wal-Mart, which
controls 22% of the U.S. grocery market, with each vowing to undercut whatever
price the others offer, and now with Amazon in the mix, a price war seems likely.
To request the sample report, please visit: https://www.techsciresearch.com/report/global-organic-food-market-by-product-type-organic-meat-poultry-and-dairy-organic-fruits-and-vegetables-organic-processed-food-etc-by-region-europe-north-america-asia-pacific-etc-competition-forecast-and-opportunities/833.html
Firstly, a quick
and dirty on Whole Foods. As per TechSci Research report “Global Organic Food Market By Product Type, By Region, Competition
Forecast and Opportunities, 2011 – 2021”, Whole Foods’ organic/natural food
products retail coverage area share was around 70%, the highest in the US and retail coverage area share for
other products was around 30% (all data provided is for 2015). Experts at
TechSci Research in the report had singled out Whole Foods as the top prformer
in key areas in the United States organic foods market. Whole Foods Market is a
Fortune 500 compnay (ranked 176 currently) and, as of 2015, was the 30th largest retailer in
America, where it does around 97% of its business. In addition to the US, Whole
Foods Market also marks its presence in Canada and the United Kingdom. For
Amazon, Whole Foods will be a test case of sorts; grocery sector is a sector
that Bezos has been iterested in for quite some time and the net margins
provided by Whole Foods (3.2%) far outpaced Amazon’s 1.7%. On top of this, the
physical presence of stores will bolster Amazon’s ever expanding lineup, which
includes companies like Zappos, who will find a home in a physical marketplace,
not to mention that it will streamline Amazon’s delivery service; Amazon lost
around $ 7 billion in subsidising deliveries in FY2016.
On top of this is the business of organic foods
itself. As per TechSci Research, there has been a shift in preference in recent
years from standard food to organic food products. Millenials especially are
ahead of the curve in this regard, because they are more aware about the
ill-effects of eating unhealthy, and have the disposable income needed to pay
the premium on organic foods. TechSci Research insights are borne out by data;
Whole Foods experienced a 9.8% growth (’14 vs. ‘13) primarily due to these
factors. Millenials are more used to buying products online, and, as per TechSci,
online sales of organic food accounted for around 5% of total retail sales of
organic food products globally. Amazon seems to have made a shrewd deal to retain
its tag as a market leader and thinker in the e-commerce game.
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