The E-commerce giant has slowly made its way into the supermarket industries as Amazon has agreed to buy the organic grocery chain for $13.4 billion. In order to widen the gap from its competitors, Amazon agreed to pay $42 a share for Whole Foods (a 27 percent premium from Thursday’s opening price) in their efforts to roll out fleets of physical, retail stores. Most of this retail looks like it will be dedicated to Amazon’s supermarket aspirations.
Bruce Bittles, chief Investment Strategist at R.W Baird & Co commented that “Amazon’s got tentacles everywhere and that’s another place to go.”
While Amazon.com, Inc. (NASDAQ: AMZN) Fresh already delivers groceries to customers, this concept could serve walk in patrons while also serving as a central pickup location for grocery deliveries. This deal allows Amazon to enter the enormous grocery industry that accounts for $700-$800 billion annual U.S. sales.
On the other hand, this is a new start for Whole Foods as this deal reduces pressures from frustrated investors. Last month, the supermarket corporation announced an extensive overhaul of its board and replaced 5 directors. The supermarket giant has struggled recently due to national retailers such as Costco, Safeway, and Walmart have also began to market organic products and other kitchen staples.
This deal ultimately rattles the retail sector as S&P 500 consumer staples index .SPLRCS dropped 1.145 and other companies such as Wal-Mart Stores Inc. (NYSE: WMT), Costco , and Kroger saw its shares negatively affected by the acquisition.