In a move that shocked markets and investors last week, Amazon has agreed to buy premium grocery chain Whole Foods for $13.7 billion.
The move comes as Amazon continues to experiment with brick-and-mortar supermarkets and same- and next-day delivery for fresh grocery items, aimed squarely at toppling Walmart from its throne at the top of the retail world.
The $13.7 billion deal heightens a years-long battle between Amazon, the Internet darling, and powerhouse merchants such as Walmart, which recently beefed up its online operations with a $3.3 billion purchase of an Amazon competitor.
Now Seattle-based Amazon — which for years has been testing grocery innovations in quiet corners — could lay claim to a fleet of more than 460 stores throughout the United States, Canada and Britain.
Whole Foods has earned the nickname “Whole Paycheck” thanks to notoriously high prices on premium goods, as well as the relatively high salaries paid to employees. Insiders say those days may be over, with rumors of cashierless checkout technology, job cuts and other changes swirling around the deal.
Amazon is considering extending the cost-cutting effort with the no-checkout technology it’s developing at its Seattle convenience store, “AmazonGo,” according to the person familiar with the matter, who asked not to be named because the plans are private. The technology lets people pay with smartphones without seeing a cashier or going to a checkout kiosk, which would help Amazon differentiate itself in the brick-and-mortar setting and reduce labor costs at Whole Foods stores. The employees remaining would help improve the shopping experience, the person said.
Drew Herdener, an Amazon spokesman, said in a statement the company has “no plans to use no-checkout technology to automate the jobs of cashiers at Whole Foods and no job reductions are planned.”
Amazon would also look to change Whole Foods’ inventory, introducing its own private-label products to replace items deemed too expensive to have mass appeal, the person with knowledge of the matter said. That fits with Whole Foods private-label push to compete on price, and gives Amazon a bigger foundation on which to develop its own food brands.
The deal was announced just as Amazon introduced a new Dash system device, the Dash Wand, which allows users to easily reorder groceries or make shopping lists using a built-in barcode scanner and Alexa digital assistant integration.
Amazon has also been expanding its Amazon Fresh service, which provides fresh groceries for pickup or delivery. Analysts believe both the Dash and Fresh services could be coming to Whole Foods once the deal is officially done later this year.
The buyout still needs the approval of regulators, and there is still conceivably time for a rival bidder to appear.