Amazon buying Whole Foods in bold move into brick and mortar

Amazon has agreed to buy the organic grocery chain for $13.7 billion, or $42 a share, in an all-cash transaction and assume the company's debt.

With Whole Foods, Amazon gets an established business that it can transform through its technology and supply network expertise.

Amazon is making a bold expansion into physical stores with a $13.7bn deal to buy USA grocery chain, Whole Foods.

Armed with giant warehouses, shopper data, the latest technology and almost endless funds - and now with Whole Foods' hundreds of physical stores - Amazon is set to reshape a US$800 billion grocery market that is already changing rapidly.

Whole Foods Market will continue to operate stores under the Whole Foods Market brand. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the United Kingdom could be turned into distribution hubs - not just for delivering groceries, but also as pickup centers for online orders.

What's unclear is how Amazon will run a chain of grocery stores.

"It gives them a first step in Canada", said Michael von Massow, an associate professor at the University of Guelph, adding Amazon has shown it's committed to entering the food business.

Wal-Mart is offering curbside pickup of online grocery purchases at 700 locations, with 300 more planned by year end. Bezos also has been testing concepts for physical grocery and convenience stores, and it recently opened kiosks for commuters to pick up groceries they had ordered online. Stone sees the possibility that Whole Foods CEO John Mackey could do what he's wanted to do, expand the chain to about 1,000 stores from its current stable of more than 460.

By joining forces with Amazon, Whole Foods gains access to an entirely new distribution channel - which should be good news for anyone hoping to shop for organic kale online.

"For the most part, it's too expensive for me to do all may shopping there", said Mary Funari, a Whole Foods shopper.

"They're doing an wonderful job and we want that to continue", Amazon founder and CEO Jeff Bezos said. The investment firm Jana Partners said in April that it had built up an ownership stake in Whole Foods because it saw ways to address its "chronic underperformance for shareholders".

Pachter said that even if Amazon gets 20 million members of its Prime loyalty program to pay $15 a month extra for AmazonFresh grocery-delivery service, that's 20 million not going to traditional supermarkets.

Whole Foods 365 offers private-label goods and lower prices than typical Whole Foods stores, and is targeted at younger, value-conscious shoppers.

Amazon's $13.7 billion deal to purchase Whole Foods won't close until the second half of this year, but grocery stores are already feeling the pain. Whole Foods was, however, costlier in 1992 as compared to today (keep the times in check) and it has been reducing the prices to keep the sales in check.

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