With the recent acquisition of Whole Foods, Amazon has made its first step from e-commerce sales to the only section of the retail industry that is not shrinking: Grocery.
At $42 per share, Amazon have paid a premium price of $13.7 billion for the supermarket chain and with the takeover in place, immediately dropped prices by as much as 46%.
Whole Foods as been straggling to grow and has been criticized by its investors for poor performance, and by consumers, for high prices.
Walmart and Amazon have been engaged in an epic battle over the retail industry with Amazon winning the e-commerce front and Walmart controlling the retail space and making modest gains with its e-commerce division.
Walmart’s e-commerce sales totaled about $14 billion in 2015, which was just 3 percent of its $482 billion in total yearly revenue. As a comparison, Amazon’s sales hit $107 billion last year.
Earlier this year, Walmart merged its tech teams in Silicon Valley and at it’s company headquarters in Bentonville, Arkansas to speed up collaboration and reduce duplication.
The merge allows Walmart’s technical teams to speed up innovation efforts and operate more efficiently.
Walmart has also recently announced it was testing two-day free delivery as part of a shipping membership service similar to Amazon Prime.
Former Wal-Mart Chairman S. Robson “Rob” Walton, son of founder Sam Walton sold $62.3 million worth of company shares as soon as word of Amazon’s acquisition hit Wall Street.
Walton was company chairman from 1992 to 2015.
This is a sign that while Walmart were trying to catch up with Amazon’s ecommerce efficiency and conversion rates, Jeff Bezos have brought the war to Walmart’s gates.
With a pricing strategy to match Walmart’s grocery division and a much better product, Amazon is aiming directly at consumers that are likely to shop at a Walmart store, and with a prime membership incentive, introducing its online services to a new segment of non-Prime customers.
Will Walmart be able to respond in time?