While the ink is still drying on Amazon.com Inc.'s (AMZN) blockbuster $13.7 billion agreement to buy Whole Foods Market Inc. (WFM) , many are already speculating what the combined company might look like should the deal be completed.
The proposed deal would make a combined Amazon and Whole Foods the nation's fifth-largest grocery retailer, behind Wal-Mart Stores Inc. (WMT) , Kroger Co. (KR) , Costco Wholesale Corp. (COST) and Albertsons/Safeway, according to Cowen and Co. LLC analysts. While the tie-up differs from Amazon's typical acquisition strategy of build first, buy second, Cowen analysts said the acquisition makes sense, given that the grocery market is valued at approximately $1.3 trillion in the U.S.
Above all, it shows that Amazon isn't yet ready to abandon the brick-and-mortar model and believes that physical stores could be the best medium to bring new retail technologies straight to the consumer, said Nancy Tseng, a director in West Monroe Partners LLC's mergers and acquisitions practice.
"This is a key turning point in how we shop, how we buy, how we're influenced and really a reflection of how strong of a role tech and internet companies play in our daily lives," Tseng said.
True to its mantra, Amazon is on a mission to be a customer-centric company, and the Whole Foods deal only builds on that goal. The tech giant will be able to use Whole Foods' existing customer base and 450-plus physical stores that have an "unparalleled" in-store experience to begin an all-out integration of Amazon services in consumers' daily lives, Tseng said. Marrying organic product sourcing with Amazon's supply chain warehouse distribution, product forecasting, pricing optimization and Alexa-powered offerings could revolutionize the consumer shopping experience, she added.
For example, if a shopper were looking to find the perfect organic apple, Amazon could put Whole Foods' distributors to work and then pair them with its powerful logistics infrastructure to deliver things as fast as possible, Tseng said. Last-mile logistics will be critical for that to happen, however.