Amazon has announced plans to buy upmarket US grocery chain Whole Foods for $US13.7 billion.
Chief executive Jeff Bezos says he hopes the deal will close later this year.
Whole Foods, which specialises in organic and natural products, has just under 100,000 staff and 450 supermarkets in the US, Canada, and the UK.
Analysts will be looking for Amazon to apply some of its recent initiatives to its new acquisition: its AmazonFresh quick delivery service, and its Amazon Go patented concept of cashier-less checkouts, and indeed checkout-free checkouts as people simply walk out of a store after an app on their smartphone has automatically tracked all the items they've chucked in their trolley (so far the technology is only in one concept store in Seattle).
Although the scale of the move caught analysts on the hop, Amazon has already been making moves into bricks-and-mortar shopping, including opening a series of real-life bookstores.
In April, the company confirmed a retail launch in Australia. So far, there have been no plans announced for an e-tail or retail push across the Tasman — although other services in the Amazon empire, including cloud computing and its Prime video service, are actively marketed to Kiwis.
Trump: Bezos a monopolist
Beyond the usual regulatory scrutiny, the deal could face flak from the White House.
Last year, Donald Trump, referring to Mr Bezos personally, said "He has a huge anti-trust problem, because he's controlling so much, Amazon is controlling so much of what they are doing."
The president also claims that the Amazon founder, who bought the Washington Post in 2013 is "using that for political purposes to save Amazon in terms of taxes and in terms of antitrust."
Mr Trump has also repeatedly accused the Post of fake news and bias.
There could be some Forbes' list envy in play. The US publication says Amazon's share surge today as the deal was announced has seen Mr Bezos gain $US2.5 billion in two hours to jump a place to become the world's second-richest person with a wealth of $US84.7 billion ($US4.3 billion behind the No 1, Bill Gates, on $89.1 billion, and some distance ahead of Mr Trump at 544; Forbes recently gave the president a haircut, trimming its estimate of his wealth to $3.5 billion as property prices fell).
— Financial Times (@FT) June 16, 2017
Mr Bezos' wealth has jumped $US10 billion over the past two months amid a flurry of good news for his company's e-tail operation, Amazon.com, and its cloud computing division, Amazon Web Services (AWS), which is leading its closest rivals Microsoft, Google and IBM by some distance.
Amazon has also quietly increased its lending activity through Amazon Capital Services recently. The Financial Times says the six-year-old, low-profile division is emerging as a serious challenge to the big banks. ACS targets small businesses selling through Amazon.com, then offers them loans at anywhere from 6% to 17% (or according to a Wall Street Journal account, anywhere from below 1% to 13.9%). The FT says ACS has done about $US3 billion in loans, with $US1 billion in the past year. According to the FT, Amazon plans to ramp that up with an expansion of its lending business in the US, the UK and Japan. The UK paper sees ACS on a similar trajectory to GE Capital, which ended up with $US500 billion on its books.
Amazon is also eyeing new areas. A June 15 Bloomberg report had it eyeing a $US9 billion bid for Slack, the maker of a trendy chat app that companies use for in-house discussion.
Some projects, such as its smartphone, have been a flop, but in others such as artificial intelligence with its hit line of Echo smart speakers with the Alexa personal assistant, have put it ahead of competitors like Apple and Google.
— Financial Times (@FT) June 16, 2017
Buying Whole Foods for free
If the deal is not approved, Amazon will have to pay Whole Foods a $US400 million breakup fee, according to an SEC filing.
But that's small potatoes for Mr Bezos' company.
Amazon shares jumped 3.3% as the Whole Foods deal was announced, pushing its market cap to $US470 billion. But the Journal pointed out that it needed just a 2.97% rise to effectively cover the cost of buying the supermarket chain (although it's not quite that simple as it's an all-cash deal).
By contrast, shares in major retailers fell by a similar amount.
Similarly, Wesfarmers' ASX-listed shares fell 3% in a session earlier this month after the chief executive of the group (which includes Coles and Bunnings in its retail portfolio) said its 4000 bricks-and-mortar stores positioned it well to compete with Amazon.
Amazon has e-tail and cloud computing operations in Australia but no immediate plans to expand into New Zealand – although its AWS division is actively targeting Kiwi customers and recently signed a controversial all-of-government deal. The state of our dollar makes Amazon.com.au an attractive destination for some shoppers, adding to pressure on The Warehouse Group.
Amazon has also released its Prime streaming video on-demand service for New Zealand, albeit with a relative paucity of content compared to the US version.
Jeff Bezos: "Alexa, buy me something from Whole Foods."
Alexa: "Sure, Jeff. Buying Whole Foods now."
Jeff Bezos: "WHA- ahh go ahead." pic.twitter.com/GuJ2jlAiuU
— JESAL (@JesalTV) June 16, 2017
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