While Amazon buying Whole Foods Market doesn’t directly affect Woolworths, it does however highlight a very real threat posed to it when Amazon spreads its wings further in Australia in coming months.
Woolworths Limited share price was in a little hot water this week, falling 3.5% on Monday and downgraded 0.1% further the day after, which is below its 12 month high of $27.72.
Last week Amazon announced it will acquire organic food grocer Whole Foods Market in a multi-billion dollar deal. While the move doesn’t directly affect Woolworths, it does however pose a strong threat from Amazon shoring up in Australia soon.
Amazon’s looming arrival in Australia certainly sparked plenty of speculation around retailers that would be affected, including JB Hi-Fi, Harvey Norman and Myer named as some of those to potentially be adversely affected.
Similarly, it’s believed that Amazon is undoubtedly going to take some market share from the grocery space, and that includes Woolworths, Wesfarmers-owned Coles and Metcash-owned IGA. Wesfarmers shares fell 25c on Monday morning to $40.45, while Metcash shares were down 4c to $2.11.
Amazon’s acquisition of Whole Foods Market indicates a change in the e-commerce giant’s way of thinking and its interest in revving up its omnichannel capabilities. It’s a strong indication of its global intention of increasing its revenue base, and that is cause for concern in the grocery sector.
Previously, analysts believed that the extensive supply chains and strong physical store network of Coles and Woolworths would help ensure groceries remained strong when Amazon starts trading in Australia.
However, Amazon’s move last week has analysts recalculating their predictions and speculating about its likelihood of entering into a joint venture with IGA supermarkets.
“Amazon clearly wants to be in grocery, clearly believes a physical presence gives them an advantage,” Wedbush Securities analyst Michael Pachter told Bloomberg.
“I assume the physical presence gives them the ability to distribute other products more locally. So, theoretically, you could get five-minute delivery.”