With Whole Foods acquisition, Amazon could 'change the grocery shopping experience forever'

Johns Hopkins finance expert examines the online retailer's bid to reshape the grocery industry

Earlier this month, Amazon announced plans to acquire upscale grocery chain Whole Foods Market, sending shockwaves through the retail industry and signaling a reboot of Amazon's effort to sell groceries online.

The move has also raised questions about the future of brick-and-mortar retail and the role machine-learning and artificial intelligence will play in the future of the grocery business.

"Amazon epitomizes a tech company's relentless pursuit of disrupting traditional businesses and comes with a strong historical track record."
Jim Kyung-Soo Liew
Carey Business School assistant professor

Jim Kyung-Soo Liew, an assistant professor at the Johns Hopkins Carey Business School who specializes in entrepreneurial finance and hedge fund strategies, said the deal could be a game-changer for the grocery industry.

"Amazon epitomizes a tech company's relentless pursuit of disrupting traditional businesses and comes with a strong historical track record," Liew said. "Amazon has made the online purchasing experience second to none, with low prices for goods and fast delivery, netting a great shopping experience for consumers."

Liew said he expects Amazon to apply the same principles and strategies to Whole Foods, which he said will result in a new kind of grocery experience: "The explosive combination of machine learning and data will change the grocery shopping experience forever," he said.

"Shoppers' behavior will be a key ingredient that will power Amazon's machine-learning algorithms, which will calibrate new recommendation systems using consumers' grocery shopping demands," he added. "If Amazon allows shoppers to make purchases on mobile phones within the store, this will fuel the algorithms even more."

Liew said the market's reaction suggests that investors believe Amazon and Whole Foods will integrate successfully—the price of Amazon's shares has risen slightly since the announcement. He also noted that an increase in the price of Whole Foods shares could signal a second bidder.

"Typically, the acquirer company's price performance is flat to slightly down on a merger announcement date, so Amazon being up is a very good sign," he said. "That Whole Foods prices have drifted higher tells us that lurking behind the scenes could be another bidder or that Amazon may need to raise their original bid to get this deal done. Maybe Walmart will counter after they fully digest how powerful the Amazon/Whole Foods combination will become."

Liew said the move could serve as a serious disruptor to the grocery industry.

"Other retail grocery stores will now have to move, so expect some serious consolidation in this industry," he said. "Look for cash-rich technology companies to make bids for traditional brick-and-mortar stores, then apply their deep set of machine learning and AI algorithms on this newly acquired data set. One day we will look back at this 'retail shopping singularity' event—the deal between Amazon and Whole Foods."

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