Don't expect Whole Foods stores to become fulfillment or returns centers, he says, and they may not even become hubs for Amazon to sell its own devices and hardware like Echo, Dot and others. Amazon has already launched Prime Pantry and Amazon Fresh, but has been struggling to find a foothold in the grocery industry, controlling only one percent of the $800 billion USA market. In particular, an Amazon presence in groceries might transform it from a company you shop at every once in a while to one you think about several times a week. For example, as an alternative to home delivery, Amazon could allow customers to pick up their package at the nearest Whole Foods and earn bonus points or some other reward for helping the retailer reduce its shipping costs.
Still, the widespread ramifications of a powerful and expanding Amazon will need to be more closely examined by regulators, who have a mandate to protect the public interest amid the seismic changes underway in the new economy.
Like Publix, Whole Foods contracted with Instacart for online sales, the analysts noted.
Mackey helped grow the company from a tiny health-conscious grocer in Texas into a giant in upscale chain in all but eight U.S. states. "I think we're gonna get a lot of those innovations in our stores". "Wall Street's reaction is certainly telling that story".
"There could be a lot of that market up for grabs with a better experience and value", he said.
Understandably, grocery stores frequently struggle to innovate quickly due to their thin margins, which are often 5% or less of operating income.
And yet Kroger defeated its Bentonville rival decisively. Some suggest logistics, the grocery supply chain, or an extra distribution channel for the company's growing range of own-brand electronics.
This recent history makes the $13.4 billion purchase of Whole Foods by Amazon that much more exciting.
That's "a little bit unusual", Springer said, and it probably reflects investors' concern about retail giant Amazon's potential impact.
Appliances and electronics make up the largest segment of e-commerce sales as a total of all retail sales, followed by clothing and apparel. Retail spending is now mixed between the physical and the digital, but that spending is still on the rise. Retail market consolidation, economic pressure, changing consumer preferences and intense competition are among major factors tugging profitability downward in the food business.
Additionally, the overall consumer base is more willing to purchase groceries online than it was a few years ago.
"The answer is to combine in an integrated supply chain".
Omnichannel dominance will require physical stores, CBRE said, "giving the initial advantage to those players with a wide existing store network". Walmart, were it to make Whole Foods a higher offer, by contrast, would be very likely to attract regulators' wrath. By comparison, Walmart has about 4,700 stores, while Kroger has almost 2,800 under a variety of names.
While online sales now account for just a couple of percentage points of total grocery sales, Amazon's entry into the marketplace will likely accelerate the trend industrywide.
Its biggest online idea this year is Restock, a facsimile of Amazon's three-year-old Prime Pantry service, which delivers a box full of different household essentials for a flat fee.
Wiesel, the analyst, said Amazon has been trying to crack the grocery code for years with only varied success. Antitrust experts who represent deals being reviewed by the Justice Department and the Federal Trade Commission said the transaction will be approved because Amazon sells few groceries and Whole Foods is a minnow in the grocery market with 444 US stores compared with 4,692 for Wal-Mart (WMT.N).
So what would a future grocery store look like? Restock is so far only available in Target's hometown of Minneapolis. Shoppers peruse fresh fish and clams, but pay with smartphones, scanning QR codes using Alibaba-linked payment platform Alipay as staff in red t-shirts help set up accounts and connect to wifi.
"It's hard to stay competitive, but the way we do it is bringing in new products that they don't have available at the bigger stores and also the one-on-one service", employee Danielle Tingley said.
Space saved could be devoted to specialty goods and prepared meals popular with millennial shoppers.
Amazon was accused of crippling book retailers like Borders in part through price cutting.
That's led many to believe that traditional retailing is on its way out.