Hey Groceries, Amazon is coming for you

Amazon acquisition

A quarter of Americans already prefer online shopping over the traditional brick-and-mortar for their grocery shopping, and it is forecasted to increase up to 20% by 2025. Amazon is a clear advocate of this experience, and its recent acquisition of Whole Foods strengthens their presence in the retail market by giving the online giant access to a vast number of distribution channels, thus building out its delivery capabilities and a greater leadership in the e-commerce world.

Amazon intends to keep disrupting our buying experience by moving into brick-and-mortar, a business which it has spent more than twenty years disrupting. Some argue that physical stores are still the main choice for many buyers, making them an important source of revenue. However, if the acquisition move is primarily about accessing the urban distribution centres to hone the online business (imagine picking up an Amazon parcel across the street or substantially faster deliveries), then perhaps retails stores may potentially become irrelevant. While this could be beneficial for customers by an increase in competition, and therefore lower prices, the retail market is awaiting with dread, with their stock prices going down substantially on Friday.

On the consumer side, for people that like smelling the tomatoes before buying them, Amazon aims to keep a more efficient and convenient shopping experience (Amazon is looking to build out a faster, automated based checkout process where you pick your products and walk out the store) that can not only save time for shoppers, but also their money. Similarly, it capitalizes on their business to bring us all the stuff that some people neither have the time nor the patience to hunt down (happy days for full-time mums working +40 hrs per week).

Whether prices will be higher or lower is something that is open for discussion. Although some suggest Amazon’s scope and scale could even help drive prices down without compromising quality and risking the value of Whole Foods’ reputation, we all know that organic products and hundreds of physical stores will result in higher costs. If the later takes place, will Amazon be willing to absorb the extra cost, or, will we be smelling more expensive tomatoes?

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