This was published 7 years ago
Amazon's Whole Foods takeover could lead to local grocery sector deals
Amazon's takeover of the Whole Foods business has raised suggestions among Australian observers that a similar deal could occur over here as a way of gaining instant market share.
According to Citi analysts in the US, while online grocery has been pushing for consumer adoption for more than a decade, penetration has remained low (about 2 per cent) as 90 per cent of people still like to shop for their food in-store.
The analysts said they see online grocery growing faster than it has in the past, though, through improvements in the customer experience and they believe there is an opportunity for the big companies to get bigger in part because the smaller companies can't afford the large investment.
This has prompted some speculation that Amazon could be looking at some Australian businesses such as Metcash, the wholesale distribution and marketing company specialising in grocery, fresh produce, liquor, hardware and other fast-moving consumer goods.
Amazon will buy American chain Whole Foods Market for $18 billion.Credit: Rogelio Solis
Under the Metcash banner sits the Independent Grocers Association, Foodland, Mitre 10 and Campbells Wholesale, among others.
Any deal would give Amazon instant scale and access to warehouses and distribution operators. There have been market suggestions that Amazon has been talking to Toll Holdings.
But not all retailers are concerned about the arrival of the online giant.
The chief executive of the Winning Group, John Winning, who founded Appliances Online, believes Amazon's arrival will be a wake-up call to retailers, which for too long have not adequately focused on enhancing customer experience and service.
"Amazon's arrival will without a doubt have a huge impact on the Australian retail landscape, but if businesses are now feeling worried and like they need to prepare, the issue is probably with their core business model," Mr Winning said.
"Retailers should always be improving their operations as general good business practice and if they haven't been doing that then they aren't being fair to their customers, which is why they probably lack loyalty and would happily and easily jump ship to Amazon.
"For years Australian retail has happily lagged behind other markets; now businesses need to start pursuing a global standard of operation to remain competitive when international players enter the market."
He said Australian retailers needed to realise they would be "left behind" if they did not have strong enough business models, regardless whether Amazon entered this year or next.
"Those that think they aren't prepared now have another year to either continue worrying about Amazon's arrival or an extra year to prepare and do something different," Mr Winning said.
The managing director and co-founder of Longtail UX, Andreas Dzumla, said Amazon was expected to take in about $4 billion of the retail market in Australia in just five years.
"If the numbers and projections are right, Australia's retail Armageddon is about to hit especially for online businesses," he said.
"This is why retailers need to know their customers and markets and get as much help as possible, in order to survive."
An area that is booming is cosmetics, both online and at bricks and mortar stores.
The chief executive and founder of Adore Beauty, Kate Morris, said Amazon was no doubt a formidable competitor.
"But there are plenty of beauty businesses that are thriving in markets where Amazon is present, and I'm planning to be one of them," Ms Morris said.
"We've been punching above our weight against global competitors, including Amazon, for 17 years now and have always been agile enough to find ourselves a place. Three years ago everyone was asking us how we would survive when Sephora arrived, and since then our business has tripled in size and is currently in triple-figure sales growth year-on-year.
"Our focus will be, as always, to continue to empower the beauty shopper. We're more passionate about beauty than Amazon will ever be. We invest heavily in creating great content to help our customers make the right decisions as well as offering plenty of opportunities for trial, not to mention make-up artists and skin specialists on live chat. Amazon doesn't care about helping you find the perfect foundation shade, but we do."