Here are 10 thoughts following Friday’s news that Amazon bought Whole Foods for $13.7bn
- Amazon’s share price rose, adding $11bn to its market cap. Therefore, it’s already made up most of the cost of the purchase in one day’s stock trading in USA.
- The ‘market caps’ of competitor chains in the USA (Target, Kroger, CostCo, Walmart, Dollar General, SuperValu and Sprouts) fell by a combined $21bn on Friday.
- Amazon only has about 1% grocery market share in the USA. This acquisition will provide immediate market share growth.
- Amazon has actually made dozens of acquisitions in its short life (over 70) – acquiring new companies is not new to them.
- Selling groceries (even fresh ones) is not new to Amazon – the chain more Americans order groceries online from is….AMAZON
- Whole Foods works largely in categories where there are not necessarily household name suppliers – therefore Amazon can work with whoever wants to supply Amazon (and delivers on the price/quality matrix)
- Amazon are already looking at supply/vertical integration. They now own their own fleet of aircraft to become couriers to their own products rather than working with third parties (many say Amazon learns how 3rd parties work, then do it themselves)
- Amazon already has a supply agreement with Morrisons (therefore a possible UK friendly acquisition is already lined up should all parties be interested in this?)
- Amazon is happy to play the long-ball game when it comes to profit generation – they continuously plough retained revenues into entering new markets and winning market share quickly. Will Amazon become too big for consumers one day?
- Amazon is committed to do whatever it can to deliver ‘to the last mile’…..including the use of drones.
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