Amazon is famously secretive about its business plans. So when it said last week it would pay $13.7 billion to buy Whole Foods, it caught markets by surprise.
What does the online retail giant want with a supermarket known for catering to the quinoa-eating, kombucha-drinking crowd? And will the purchase affect everyday Canadians, as well?
Global News turned to retail analysts for some answers. Here’s what they had to say:
Whole Foods-quality produce at your door
Amazon’s plans likely entail adding Whole Foods-quality produce to its online grocery offering, Andrew Dooner of KPMG told Global News.
John Bonno, co-head of grocery-consulting practice at AlixPartners, agrees. Consumers, he said, have been reluctant to do their food shopping online because they can’t see for themselves, say, whether that bunch of bananas is covered in brown spots or those avocados are too hard for guacamole.
Whole Foods’ reputation for high-quality fruit and vegetables could help more shoppers take the leap, both Dooner and Bonno pointed out.
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Your grocery list as a subscription service
Being able to deliver lettuce that’s still crispy to your doorstep would be an impressive enough task. But Amazon’s larger ambition is likely to turn grocery shopping into a subscription business, according to Dooner.
“Amazon is really good at creating repeat purchases,” he noted.
From ink cartridges to diapers, a lot of Americans and Canadians already rely on Amazon for regular supplies.
But there’s nothing people run out of as regularly as food. Amazon wants you to think of it when your fridge is empty.
Your Amazon Prime subscription could soon come to include your typical grocery list, said Dooner. It wouldn’t just save you the weekly trip to the supermarket, it would spare you the meal planning, too, he noted.
“The more they can create a consumer that doesn’t have to think, the better,” according to Bonno.
And Amazon will likely work hard to make your purchases as seamless as possible — think “one-click groceries,” said Bonno.
Will Amazon make your lunch box, too?
Your weekly box of Amazon groceries could also contain your Monday-through-Friday work lunches — or dinner for a few days.
Whole Foods is known for its prepared meals and in-store buffets, and Amazon could conceivably tap into that, as well, Dooner and Bonno said.
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Don’t expect food prices to go down, at least for now
Amazon generally muscles its way into new markets with cut-throat prices, but don’t expect that to happen for groceries, at least in the short-term.
Profit margins in the grocery business are already paper thin, said Bonno. Rather than a race to the bottom, Amazon’s purchase of Whole Foods is likely to spur retailers to pour money into online delivery. The struggle for survival in the industry will be about finding the secret formula to profitable grocery delivery, he noted.
Though the heated competition may result in lower prices over time, that isn’t likely to be an immediate ripple effect of Amazon’s massive acquisition last week, he told Global News.
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And what about Canada?
Whole Foods has over 460 stores, but only a handful of them in Canada. And Amazon’s same-day online grocery service, AmazonFresh, is only available in a few markets, even in the U.S.
Consumers north of the border will probably have to wait a while before being able to try whatever it is Amazon has in mind, said Bonno.
“This is pure speculation, but I expect they will want to get the U.S. market right first,” he said.
It will be at least 18 months before anything changes up here, he added.