If you just heard a shriek of terror off in the distance, it may well have been conventional grocery store owners reacting to news that Amazon’s just purchased Whole Foods.
The $42-per-share, $13+B deal places a large premium on Whole Foods and certainly suggests that Amazon’s ‘Fresh’ experiment whetted the online retailer’s appetite in the grocery sector. I’ve seen estimates that Amazon sold about $350M worth of groceries last year. That’s not chicken feed, but it’s peanuts compared to Whole Foods’ sales, in the $15B range.
OK, I’ll try to rein in the food puns. But seriously…
So far, U.S. grocery shoppers have been a little resistant to buying groceries online—this is especially true when it comes to produce, or dairy and other things that need to be kept cool. By contrast, in Great Britain, about half of all grocery shoppers have tried buying groceries online, and over 10% of them report doing virtually all of their shopping online.
Amazon’s acquisition of Whole Foods suggests that it feels Americans can be convinced of something similar. (At the very least, Amazon certainly overpaid, if one considers this to be only or even mainly a bricks-and-mortar proposition; Whole Foods’ stock’s been under pressure for the last few years.)
One thing Amazon may have considered is that the aging population plays to the strengths of the online grocery model.
Seniors are less enthusiastic about driving, navigating huge grocery store parking lots, and trekking around with heavy bags of groceries. I know from the experience of people in my own family that shopping online and having groceries delivered can be critical to independent living.
Although many online retailers are obsessed with younger consumers who they perceive as ‘digital natives’, the truth is that mature consumers spend more online than millennials. And as the vast majority of Baby Boomers plan to age in place, it seems inevitable that the grocery business will catch up to other retail sectors in terms of the percentage of sales that come from online purchase and delivery.