Finance

What happens to Instacart in the Amazon-Whole Foods deal?

What happens to Instacart in the Amazon-Whole Foods deal?

Any number of Whole Foods locations - more than 460 in the U.S., Canada and Britain - could be used as jumping off points for wider delivery and pickup of groceries and prepared foods ordered online.

While the deal is still to be executed, Whole Foods has pointed out that the brand name would remain the same in the stores, headquarters will remain in Austin and John Mackey will stay on as CEO. Or someone who buys granola bars monthly from Whole Foods and paper towels every other week from Amazon might be offered the items in a single shipment, delivered to the door.

Moody's lead retail analyst Charlie O'Shea said the deal could be "transformative, not just for food retail, but for retail in general".

Interestingly, Mackey called activist Jana Partners "greedy bastards" in an interview released on Wednesday. That made Instacart an exclusive partner for Whole Foods' perishable business.

And this headline from Business Insider helps explain it: Amazon is acquiring Whole Foods - and Walmart, Target, and Kroger should be terrified.

It is estimated that Americans spend about 6 percent of their income on food and it is a regular expense.

"Dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks", O'Shea said.

Grocery shopping - you either love it or hate it. When they walk out of the store, the payment is instantaneous; no more waiting to checkout, which is the biggest complaint that consumers have of grocery stores.

"Make no mistake, Walmart under no circumstances can lose the grocery wars to Amazon", said Brittain Ladd, a strategy and supply chain consultant who formerly worked with Amazon on its grocery business.

Turkey's Erdogan to discuss Qatar dispute with Trump, minister says
So far, the measures against Qatar do not seem to have caused serious shortages of supplies in shops. Erdogan also defended Qatar by saying that Doha has taken decisive stand against the Islamic State.

"This will definitely make the market more competitive", she added.

Online delivery of groceries so far has been tough for any company to pull off because of customers' concerns about the quality of meat and produce, Wedbush Securities analyst Michael Pachter said.

The announcement of Amazon's largest acquisition yet sent stock prices for major grocery chains tanking Friday morning. With a focus on "last mile" delivery of fresh foods, Instacart could certainly complement Amazon's existing services.

Whole Foods had fiscal 2016 sales of about $16 billion.

While Whole Foods has struggled to expand, Amazon has been expanding its reach in goods, services, and entertainment.

"The entry of the king of web retail into the food space has to rattle the other companies", said Brad McMillan, chief investment officer at Commonwealth Financial Network.

Amazon is buying Whole Foods for $13.7 billion, and that could be bad news for Instacart.

"They (Amazon) always try to offer the best price, which is good for the customer, but not good for the brand", Motkin said.

The Amazon Go pilot store allows customers to choose items and then pay the bill automatically by just walking out of the store, all without going to a cash register.


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