What do you get when you combine a flailing health food chain and an e-commerce giant that’s desperate to get into the grocery business? We could have found out, since Amazon was reportedly thinking about buying Whole Foods.
The discussions, according to Bloomberg, didn’t turn into a serious offer, but it’s interesting to imagine what would have happened. Amazon desperately wants to take over and dominate the grocery business, which is clear from its opening pickup-only grocery stores in Seattle and expanding access to AmazonFresh while turning the hefty annual membership fee into less hefty monthly payments.
Instead of continuing to build its own grocery supply chain and delivery network nationwide, Amazon could have purchased pre-existing grocery stores and supplier relationships from a retailer that’s already in business in the population centers of 42 states and the District of Columbia.
The acquisition would have been especially damaging to Instacart, which has an army of shoppers stationed in Whole Foods stores, picking out orders from the store shelves and delivering orders.
The deal would have had obvious downsides, though. At the time, Whole Foods was worth over $10 billion, which would have been Amazon’s largest-ever acquisition. (Its largest to date is Zappos, which it bought for $1.2 billion in 2009.)
Amazon has been slowly wading into the brick-and-mortar retail business with a few bookstores in large cities and pop-up stores across the country where it sells Fire devices and Kindles. Suddenly owning more than 400 supermarkets would have been a serious plunge into real-life retail.
Now Whole Foods will most likely sell to someone other than Amazon due to the prodding of an activist investor, and Amazon continues to build its grocery and logistics business on its own.
Why is Amazon so taken with getting into bricks-and-mortar supermarkets? Aside from boosting its fresh-food buying power and aiding distribution, it’s possible that CEO Jeff Bezos has something planned that no one has talked about yet.
In his latest annual letter, filed today with the Securities and Exchange Commission, Bezos points out that retailers sometimes have to give customers something they want, even if they don’t yet know it:
“Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.”