Instacart Thinks Its Deal with Whole Foods Will Survive Amazon Buyout

Amazon buys the Whole Food Market company. The location at 3751 E Foothill Blvd Pasadena Calif.

Amazon buys the Whole Food Market company. The location at 3751 E Foothill Blvd Pasadena Calif.

Inc just announced a deal to purchase Whole Foods Market Inc for US$13.7 billion, marking a move into the realm of brick-and-mortar stores that is already sending shockwaves through the economy. Amazon's move aims at the heart of the Bentonville, Arkansas-based retail giant's business - groceries, which account for 56 percent of Wal-Mart's $486 billion in revenue for the year ending January 31. It seemed unlikely that Instacart would hold on to its agreement to deliver for Whole Foods, soon to be owned by its goliath rival.

Shares of grocer Kroger Co swooned 9.2 percent, while Wal-Mart Stores Inc fell 4.7 percent, signaling fears that Amazon could broaden Whole Foods' product mix and cut prices. It also has expanded its prepared food business. "We see an opportunity to do a lot more of that", Lore said. Amazon's shares rose 2.4 percent to $987.71, adding $11 billion to its market capitalization, which in one sense makes the acquisition almost free for Amazon shareholders.

But a person close to Instacart told Bloomberg that the startup thinks it can still hang on to its Whole Foods partnership. How? And Amazon has said it would like to bag 2% of the United Kingdom grocery sales.

Whole Foods 365 offers private-label goods and lower prices than typical Whole Foods stores, and is targeted at younger, value-conscious shoppers.

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The Whole Foods purchase "doesn't necessarily mean Amazon will shift it into an online grocer", she said. It reportedly makes up less than 10% of Instacart's revenue, still a substantial sum.

Amazon "will likely utilize Whole Foods' existing infrastructure to shake up the brick-and-mortar market", she said, "while taking advantage of its supply chain to make the online side of the business more cost-effective". It was recently granted a patent for technology that would block shoppers from comparing prices using their mobile devices while they are in stores. It will select merchandise based on Amazon's vaunted customer data, and potentially expects the use of technology to change prices during the course of a day.

The aquisition of the high-end, elite grocery store chain specializing in organic food, with 456 locations, will allow Amazon to integrate brick-and-mortar retail into its operations, and also move into the grocery industry.

Amazon spokesman Drew Herdener said plans do not include reducing jobs as the result of the deal and that the company does not plan to automate Whole Foods cashiers jobs with Amazon Go technology. "Kroger and Wal-Mart will be impacted as their customers will defect to Amazon".

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