Why Amazon’s Acquisition of Whole Foods Could Be a Game-Changer

Amazon has gotten the process of bringing customers books and other products lightning fast down to a science, but delivering fresh groceries has proven to be much more of a challenge. The firm’s recent acquisition of Whole Foods, however, aims to turn the tide in their favor.

With Whole Foods, Amazon will gain a giant distribution network of warehouses and hundreds of stores around the world, along with plenty of cold storage and back rooms, in some of the nation’s most affluent areas. This will not only allow them to deliver fresher food faster, but it will also allow them to expand their AmazonFresh grocery delivery service to new areas.

In fact, Wedbush Securities Analyst Michael Pachter estimates that the move will give Amazon 440 refrigerated warehouses in a radius of just 10 miles of around four-fifths of the population and, more importantly, around 95 percent of its Prime members. In one fell swoop, Amazon has eliminated the sole advantage that competitors like Walmart and Target had over them: the presence of brick and mortar stores.

Not Just About Groceries

Some experts believe Amazon’s new deal with Whole Foods will expand beyond groceries. For example, Whole Foods outlets could be used as places for people to drop off returns of goods bought from Amazon.com or even exchange them. In addition, it could serve as a hub where customers can pick up Amazon orders in general if, for example, they don’t want their packages left outside their home. This would also help cut down on delivery costs.

For Amazon, it’s also a way to get more customers to take a look at some of its goods that have higher margins than groceries. Because people tend to buy fresh food far more frequently than durable goods, the firm will have access to a high amount of customer traffic, so it can devote some shelf space to these higher-margin items and increase profits further.

This blog post was based off of an article from the Los Angeles Times. View the original here.

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