On June 16, Amazon rocked the organic food world by announcing its intention to buy the Whole Foods for nearly $14 billion. After announcing its intention to close 9 grocery stores and abandon plans for opening 1200 new stores, this is nothing short of a lifeline for the struggling retailer.
The Motley Fool reported that trading on Whole Foods stock was briefly suspended on the day the announcement was made, but that when trading continued, shares of the organic food market’s stock had skyrocketed to $42, or 27% above the previous day’s closing. Amazon’s investors also seemed on board with the deal as the online giant’s shares also rose by nearly 3%.
When Amazon’s bid to buy Whole Foods was announced, John Mackey, the grocer’s CEO, addressed employees, gushing about Amazon’s technological innovation. “We will be joining a company that’s visionary,” Mackey said, according to a transcript of the meeting. “I think we’re gonna get a lot of those innovations in our stores. I think we’re gonna see a lot of technology. I think you’re gonna see Whole Foods Market evolve in leaps and bounds” (Bloomberg).
Fortunately for the trucking and logistics industry, it seems as though the online giant, CEOs, and Whole Foods investors aren’t the only ones to benefit from the new agreement.
The Bloomberg article, republished on Transport Topics, went on to note that the most immediate changes would likely be in the warehouses.
“‘That suggests the jobs that could be affected the earliest would be in the warehouses, where products from suppliers await transport to store shelves,’ said Gary Hawkins, CEO of the Center for Advancing Retail and Technology, a Los Angeles nonprofit that helps retailers and brands innovate…‘The easiest place for Amazon to bring its expertise to bear is in the warehouses, because that’s where Amazon really excels,’ Hawkins said. ‘If they can reduce costs, they can show that on the store shelves and move Whole Foods away from the Whole Paycheck image.’”
Go By Truck Global News reported that the impact of the deal would be positive for the transportation industry and that the acquisition demonstrated the importance of both brick and mortar stores and an increase in eCommerce sales. Both indicators bode well for the trucking and logistics industries.
The Last Mile
Amazon isn’t buying “just” a grocery store, it’s buying a network of 460 stores that is can turn into showrooms and sophisticated cold storage warehouses.
The journey on a piece of fruit becomes significantly more difficult during the “last mile” — the last leg of the journey before a product lands in the consumer’s hands — than that of a book or piece of furniture. This particular hurdle has proven to be one of the biggest stumbling blocks for Amazon as it worked to enter into food delivery realm.
“The long journey of, say, an avocado from Mexico gets progressively harder the closer it gets to the final consumer. It’s more costly and time consuming to deliver individual pieces of fruit to many customers. The hurdle, which has long vexed online retailers and is one of the chief reasons the grocery business is notorious for its low profit margins.” (LA Times).
By acquiring Whole Foods, Amazon brings itself significantly closer to solving the problem of the “last mile.” It’s network of stores, distribution centers, seafood processing plants, kitchens and bakeries are present Amazon and the trucking industry with incredible opportunities. Thanks to its deal with Whole Foods, Amazon will soon enjoy a vast network of upscale markets in some of the most coveted upper and upper-middle class neighborhoods in the country.