Amazon deal rocks retail sector

The Whole Foods purchase gives Amazon hundreds of physical stores, the footprint the company knows it needs.

Amazon is buying Whole Foods in a deal valued at $13.7 billion. It also 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. Moreover, the analyst believes that the announcement has far-reaching consequences for all food retailers as well as the retail space as a whole.

One reason Kroger is hurting stems from the improvements Walmart has made in its grocery business, which accounts for more than half of its annual sales.

They have indicated that they do not plan to automate cashier jobs in the stores, .

"Fresh foods are the final frontier for Amazon", Portalatin said.

"The conventional grocery store should feel threatened and incapable of responding", Pachter said.

"It's pharmacy. It's having the ability to put stores that are similar to Apple stores inside Whole Foods", he said.

It took a different path from online competitors like Shipt, Instacart and Peapod, which use existing retailers to deliver groceries and avoid holding inventory. It announced Friday that it's buying online men's clothing retailer Bonobos for $310 million, following a string of online acquisitions such as ModCloth and Moosejaw.

Just two years ago, Whole Foods CEO John Mackey predicted disaster for Amazon's foray into grocery delivery, telling Bloomberg BusinessWeek it would be "Amazon's Waterloo".

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Amazon already offers grocery-delivery services in five markets, but analysts say expansion is tough because its current distribution centers are set up for dry goods, not perishables.

Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions in North America and internationally.

That could help Amazon both cut shipping costs and draw more customers into Whole Foods locations.

But shoppers could start to grow more comfortable buying, and Amazon sees the grocery business as a hot market because shoppers buy weekly or even more often for items they run out of.

In exchange for this strategic deviation, Amazon gets access to a slew of wealthy customers and information about their food-buying habits. Whole Foods was, however, costlier in 1992 as compared to today (keep the times in check) and it has been reducing the prices to keep the sales in check. Other players, including SuperValu (SVU), Ahold, Target (TGT) and Costco, also all fell on news of Amazon's Whole Foods acquisition.

That was feeling of Taylor Malooly, 19, a University of Texas student at Whole Foods in Austin, who said a Whole Foods delivery service would have to be fast if he were to try it. The stores will evolve to become more experiential.

Barry Rosenstein, founder and managing Partner of Jana Partners LLC.

Fresh herbs for sale are pictured inside a Whole Foods Market in the Manhattan borough of New York City, New York, U.S. June 16, 2017.

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