China leads the way on online grocery

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Now the deal will likely quicken those efforts.

It's been nearly a week since the initial announcement of Amazon's (AMZN - Free Report) intent to purchase organic grocery chain Whole Foods Market (WFM - Free Report), and Wall Street is still caught up in the "what ifs" and "what will bes" of the deal.

With Amazon, their grocery delivery service costs $15 a month, and this is on top of the annual Prime membership fee you have to pay.

Bush said Amazon's success in offering a massive array of products at low prices masks a business model that succeeds by pushing producer prices down. They may also need to seek innovative partners of their own.

That said, Mr. Mackey told his Whole Foods colleagues to expect significant change from a corporate perspective.

Groceries are already a fiercely competitive business, with low-priced rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first US stores just this week.

Kroger Co., for instance, has touted the opening of Murray's cheese shops in some locations. Whole Foods itself had launched an offshoot chain named after its "365" private label brand in a nod to the popularity of no-frills chains.

Leonard noted his chain is known for free samples and costumed farm animals that walk around stores and greet shoppers.

"Even if you have fast delivery, the freshness of prepared foods won't be acceptable", she said. Some chains have classical musicians play as shoppers wander from wine sections to sushi stations or meet friends for a bite.

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What you probably won't see is a random stockpile of food and a long line at the register.

Major grocery retailers were already stepping up their efforts in delivery and in-store pickup of online orders.

However, a Walmart bid wouldn't likely win against Amazon's $13.7 billion offer, said the analysts, "given Amazon's war chest of cash/stock and the value of the WFM platform to Amazon". Its German counterpart, Lidl, just opened its initial 10 USA stores.

Maintaining the right balance will be critical. By comparison, Walmart has about 4,700 stores, while Kroger has almost 2,800 under a variety of names. They contended that buying small amounts of so many food items eroded the company's profits.

"Publix can sit back and watch other competitors get bigger by buying subpar grocers and going further into debt by doing it", he said. Wal-Mart lifted its base wage to $10/hour a year ago, and Kroger said on its earnings call last week that it was lifting its pay in some competitive markets. Mass players such as Walmart/Sam's, Target, and Costco are more entrenched online, though less so in grocery (especially perishables) than non-foods. Fadem understands why Amazon risk is more of a threat to food retailers than they were before, but the analyst thinks the threat has been "overestimated". It provides the world's largest cloud infrastructure, its television shows have won 11 Emmys in two years, it's a global leader in tablet sales (behind only Apple and Samsung), its work in artificial intelligence is competitive with Google and IBM, and it operates the world's most-watched live video streaming service (Twitch).

In reviewing this acquisition more closely, I see an admission from Amazon, and a few reasons why I believe this deal will have minimal impact on most grocery stores in the immediate future. Several hundred grocery chains, convenience stores, dollars stores as well as mom and pop stores account for the rest. Amazon knows a lot about customer behaviour online; now it will be able to marry that to data about habits in physical stores.

And in turn, the company could revive its recently stalled ambitions to expand to 1,200 USA stores.

Lidl and Aldi's growth plans have put volume and pricing pressure on conventional food providers. And Technomic is looking for the sales at independent restaurants to grow about 5 percent through 2020, outpacing the 3 percent forecast for the larger chain restaurants. To date Amazon has run only a handful of stores; Whole Foods will give it more than 450.

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