10 days ago, Amazon announced its largest acquisition ever – $13.7 billion for grocery chain Whole Foods (see chart below). The stock prices of competing grocery sellers like Walmart, Target and Costco dropped sharply, prompted by fears that Amazon would take over the grocery world like it has online shopping.
However, part of the reason Amazon bought Whole Foods is that it found it difficult to simply reinvent food shopping all on its own. While purchasing Whole Foods will give Amazon an important boost in its foray into fresh food sales, it is still a multi-year project for Amazon and one that is not guaranteed to be successful.
What is clear is that this move will encourage, even necessitate, innovation by competitors. Amazon has been so dominant in online shopping in part because other firms have chosen not to invest as much as Amazon has in new services. This time, competitors may not be as hands off, leading to a much faster timeline from the industry as a whole for innovations like smartphone grocery shopping and rapid curbside delivery.
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