On August 28, Amazon officially acquired Whole Foods. There have been some immediate customer facing changes such as slashing prices on a selection of common foods and offering the Amazon Echo and Dot devices in stores. Amazon has promised even more changes in the future.
The acquisition of Whole Foods will give Amazon’s physical distribution network a larger footprint. Currently, “Amazon Locker” pickup points, while many in number, are constrained by both their physical size and the number of available lockers. Now Amazon customers will be able to pick up larger items and even return products via Whole Foods locations. The purchase of the grocery chain has also been expected to further Amazon’s grocery delivery service. Many products from Whole Food’s 365 brand are now available on the online retailer’s website.
This acquisition is unique in that a digital company is growing its physical presence, in stark contrast to other retailers who began in brick-and-mortar stores and are now trying to grow their online presence. As Whole Foods’ prices are lowered, they will become more competitive with the “standard” grocery stores such as Kroger or Albertsons.
The lower prices will bring more customers to Whole Foods locations. The increase in the number of people going in and out will benefit property owners in Whole Foods anchored centers. Hopefully, we will see retail rents and vacancy rates stabilize in Whole Foods anchored centers given what will likely be higher traffic counts. The asking rents on vacant spaces may be affected in a short term but time will tell if Whole Foods locations will drive nearby rents higher. On the sales side, property values will go up and this will manifest as higher prices, but it will take time for these sales to develop and close so the effect will not be seen for some time.