Amazon Buys Whole Foods’ Grocery Stores

By now you have likely heard about Amazon’s planned acquisition of Whole Foods for $13.4 billion. The combined companies will span the breadth of online shopping, and add 460 physical outposts in hundreds of communities across the United States.

The grocery business today accounts for approximately $800 billion in annual spending in the U.S. Yet, in its current form, Amazon has not been able to make a major inroad to selling groceries online. The Whole Foods purchase would give Amazon direct access to consumers, and their information, as they shop in stores for their foods. On average, groceries are purchased five times per month.

It seems somewhat incongruent that a 23-year old company funded on shopping over the Internet is now investing heavily in brick-and-mortar stores. Yet, Amazon has been opening some stores in select locations – bookstores and food-to-go. The combined companies would become the fifth largest grocery retailer, but only account for 3.5% of grocery spending in the U.S.

Where – and how – will you shop for groceries?

Group Activities and Discussion Questions:

  1. Discuss with class: Why did Amazon purchase Whole Foods?
  2. Which retailer(s) will be most pressed by this acquisition? Why?
  3. Discuss how grocery retailers will compete with the combined Amazon/Whole Foods.
  4. Is the Whole Foods acquisition a good move by Amazon?
  5. Discuss the four primary marketing strategies: market penetration, market development, product development, and diversification.
  6. Which strategy is Amazon using by purchasing Whole Foods? Why?

Source: New York Times, Wall Street Journal, other news sources

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