Amazon could try to use automation and data analysis to draw more customers to stores while helping Nasdaq-listed Whole Foods cut costs and perhaps prices.
Walmart, which has the largest share of the U.S. food market, has already been pushing harder into e-commerce to build on strength in its stores and groceries.
A Whole Foods Market is pictured in the Manhattan borough of New York City, New York, U.S. June 16, 2017.
But if Amazon can be the one-stop shop for everything - groceries had been one of the key missing elements - customers would have even less of a need to go to Walmart or elsewhere. The Seattle-based company already offers discounted Amazon Prime memberships for people receiving government assistance and is part of a pilot program to deliver groceries to food-stamp recipients. "That means we can rely upon Whole Foods' consistently high quality meat and produce, and can rely upon prompt delivery from the store as a distribution point".
The grocery chain, known for its organic options, had been facing increased pressure from rivals, including European grocery chain Lidl, which is planning to enter the East Coast market, along with Aldi and Trader Joe's.
But no one expects Whole Foods to keep doing business the way it has been.
"I think that this takes all of the pressure off Whole Foods and gives Whole Foods the opportunity to revitalise that business and, of course, it stems the criticism from all of these activist investors", said Neil Saunders, managing director of GlobalData Retail in NY.
They have indicated that they do not plan to automate cashier jobs in the stores, . The shopper's Amazon account gets automatically charged. The acquisition price implies a trailing 12-month price-to-earnings multiple for Whole Foods of 31 times, versus a 14.4 average for the S&P 500 Food Retail index.
Amazon would also look to change Whole Foods' inventory, introducing its own private-label products to replace items deemed too expensive to have mass appeal, the person with knowledge of the matter said.
Belpointe Chief Strategist David Nelson told CNBC that the acquisition of Whole Foods will give Amazon.com, Inc. For example, when it comes to buying fresh food, we like to feel, see and touch the fruits and vegetables we're buying. With Whole Foods, Amazon is getting 456 brick-and-mortar stores in North America and Britain.
"With the nationalization of its Prime-only delivery benefit, Amazon will be able to further incentivize its premium loyalty program, Amazon Prime, and bring more people into its ecosystem", Caporaso said.
Whole Foods Market was founded in 1978 and as organic food became all the rage, so did Whole Foods.
Amazon and Whole Foods take diametrically opposite approaches to pricing. The deal still has to get approved by shareholders and regulators.