Can Amazon persuade enough people to buy fresh food online?

Amazon to buy Whole Foods Market in deal valued at $13.7 billion

Amazon to buy Whole Foods Market in deal valued at $13.7 billion

Shares of grocer Kroger Co swooned 9.2 percent, while Wal-Mart Stores Inc fell 4.7 percent, signaling fears that Amazon could broaden Whole Foods' product mix and cut prices.

Shares of Whole Foods closed Friday at $42.68 - topping the $42 per share offer that Amazon put in for the Austin, Texas-based grocery store chain. "Whole Foods' online grocery channel is operated by Instacart, which will likely not be the case for long if the acquisition is approved".

Moody's lead retail analyst Charlie O'Shea said the deal could be "transformative, not just for food retail, but for retail in general".

There's also the "grocerant" trend - a blending of grocery stores and restaurants. Backed by its express delivery network, it has entered the USA grocery market with limited success through its online platform in recent years under a brand name known as AmazonFresh. Kroger sank 11.48 percent, while Costco dropped 5.64 percent.

The growth of online grocery shopping has faced barriers. "This deal gives them credibility with consumers and a major foothold in that space". "That is the reality today at Amazon, and it will no doubt become the reality at Whole Foods", said UFCW President Marc Perrone in an email. But she would never buy food online, she said. It announced Friday that it's buying online men's clothing retailer Bonobos for $310 million, following a string of online acquisitions including ModCloth and Moosejaw. Stone sees the possibility that Whole Foods CEO John Mackey could do what he's wanted to do, expand the chain to about 1,000 stores from its current stable of more than 460.

In Whole Foods, it is acquiring a company that has recently come under pressure from investors for its lagging performance.

But Instacart is also a competitor to Amazon's growing grocery delivery service, AmazonFresh.

"For other grocers, the deal is potentially terrifying", Neil Saunders, managing director of GlobalData Retail, wrote in a report released Friday.

"We love Amazon, and we love Whole Foods".

Amazon could also get a better picture of customers by marrying data from Amazon and Whole Foods' loyalty programs.

But is Amazon turning into a monopoly? "We are seeing very early signs here across AMZN Bookstores and the Amazon Go store in Seattle", Anmuth wrote in a note obtained by CNBC. Then it uses sensors, computer vision, and deep-learning technology to track shoppers and what items they pick up.

Whole Foods, founded in 1978, saw its stock peak in 2013 at $65.24. The stock is up more than 31% so far this year.

As for its stock price, the grocer skyrocketed up almost 30 percent in just one day.

But a person close to Instacart told Bloomberg that the startup thinks it can still hang on to its Whole Foods partnership. How?

It's not yet clear how its drone delivery program or Prime one-day delivery could change Whole Foods.

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