Amazon's purchase of Whole Foods poised to jolt seafood sales
Amazon.com's intention to buy Whole Foods Market for USD 13.7 billion (EUR 12.2 billion) will change the way food is sold and delivered – including fresh and frozen seafood.
The deal, announced last week, still requires approval from regulators and Whole Foods shareholders, but if it goes through, it will likely create a sea change in the way food – and seafood – is sold to consumers.
"For Amazon, Whole Foods fulfills, at a stroke, its ambition to be a serious player in the grocery market," wrote Neil Saunders, managing director of GlobalData Retail, in a research note.
While Amazon has quickly become a bigger player in the the grocery industry, it still accounts for only 0.19 percent of the United States market, according to GlobalData Retail. Conversely, Wal-Mart Stores Inc. snared 14.45 percent of the U.S. food and grocery market share in 2016, and Whole Foods had a 1.21 percent share of the market.
Traditional brick-and-mortar retailers know that Amazon brings an e-commerce and delivery framework to the table that they cannot immediately compete with. In fact, shares of traditional grocery chains, such as Supervalu and Kroger, fell after the merger news was announced late last week. While the stock prices of some major food retailers have rebounded since then, Walmart shares were still down 0.5 percent on the morning of 19 June, while Target shares had plummeted three percent and Costco shares had dropped two percent.
Amazon has upped the convenience game when it comes to grocery delivery, steadily expanding its AmazonFresh delivery service into cities in the U.S. and into other countries over the past few years. The retail giant recently added London, England; Tokyo, Japan; Berlin, Germany; and Potsdam, Germany, to the list of cities it serves with AmazonFresh. That list already including numerous U.S. cities, including New York City and San Francisco, California.
With AmazonFresh, Amazon Prime members can order fresh meat, fish, fruits, produce, prepared foods, and other groceries, and Amazon will deliver it to their doors. It is likely that Amazon will eventually deliver Whole Foods’ items as well - including its vast array of fresh, frozen, prepared and canned sustainable seafood.
“Amazon Prime service will excel at bundling mix-and-match seafood meal components, complementing existing trends at urban 365 stores and Whole Foods locations,” Steven Johnson, grocerant guru at Tacoma, Washington-based consultancy Foodservice Solutions, told SeafoodSource.
In addition, Amazon will bring its frictionless payment options to Whole Foods’ customers, along with proactive marketing of prepared meals for last-minute dinners, including delivery within an hour at most locations, Johnson said.
“The Amazon-Whole Foods combination will bring complexity-free food home nightly — if that is what you want — at over 444 Whole Foods’ locations in the U.S.,” Johnson said.
Whole Foods already excels with fresh and frozen sustainable seafood, and that business is expected to grow with the Amazon acquisition.
Twenty percent of all American consumers (and 24 percent of Generation Y shoppers) bought from Whole Foods last year, according to NPD Group.
“Consumers are attracted to the single-portion packaging of both fresh and frozen sustainable seafood at Whole Foods and 365 by Whole Foods,” Johnson said.
The massive online retailer also launched AmazonGo earlier this year, a test store heavily focused on fresh and prepared foods, which features technology that assigns shoppers’ purchases to an app. They are then able to walk out the door with their purchases, without having to wait in a checkout line.
Amazon could introduce similar technology in Whole Foods’ stores, allowing consumers to quickly grab prepared seafood meals for lunches, snacks, and dinners.
“Bricks and mortar stores will also allow Amazon to expand its options for ordering, pick-up and delivery,” said Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.
In the United Kingdom, the acquisition is expected to make online grocery shopping more approachable for consumers.
“Online grocery shopping has grown rapidly and may seem quite well established, but it is still a fairly niche option for food shopping. Only just over a quarter of the U.K. population shopped online for groceries during the past year, and many consumers still don’t do so regularly,” McKeviit said.
To that end, Whole Foods brings “many of the crucial ingredients the e-commerce giant has been missing in its other forays into food and drink,” McKevitt said.
“The power of a physical presence on the high street to grow a brand’s reputation and credibility is particularly important in grocery, where consumers want to be able to see the quality of the items they’re buying first hand,” McKevitt said.
The combination of Whole Foods and Amazon will create a consumer retail platform that will “establish new standards for fresh food retailing, driving costs down while elevating fresh, ‘better-for-you’ food,” Johnson said.
Meanwhile, Amazon said the Whole Foods Market brand will remain intact throughout the grocer’s 460 brick-and-mortar stores across the United States, in Canada and the United Kingdom, and its headquarters will remain in Texas.