Recently the story hit the markets about hottest acquisition going on in retail business, Whole foods and the buyout from Amazon. Generally speaking acquisitions are nothing new in technology or distribution sectors, but when it comes to one of largest markets in the world -food this is a game changer that should be looked very closely to see where the future is heading. For investing and use side this is extremely important.

Amazons distribution inside North America has been growing exponentially over past several years. Main focus for profit margins have been products made in China shipped to US and sold at hefty higher price, however additional to that there was significant market size of products that simply were only possible to access on Amazon trough quick search instead of drviging around whole country to get them, or products that certain users were willing to pay on higher price if they found shopping unnecessary or unwanted deed. There is market everywhere to fill, and one market that was waiting to be entered was food.
If Amazon can quickly transport product to buyers address there really is very little products that fit on restriction area for Amazon to sell, and most food products are actually fine to ship under correct conditions.

Automatization and robotization of retail store workers

Self checkout stations are quite a standard practice across the globe and have been on one side helping users to go trough store checkout quicker especially if carrying smaller load, but on other hand also significantly shifting the workforce of store into smaller number of workers. The trend is very obvious, the more the robotization hits the stores, the less human workforce there is in them, and the more profits that company keeps in long term for lower month to month costs.

Now while this technology and practice still usually keeps at least some workers in store to allow 50-50 option for user to decide where to check out of store, there is whole another practice incoming from what Amazon is edging on Whole foods, and therefore impact that such practice would have on whole global retail food distribution.

Food distribution and purchase 2.0

Distributing the food with Amazon shipping would potentially change the landscape of retail stores, simply becouse this isnt a hybrid step that self checkout stores took, it would completly dispose any worker in retail store as long as Amazon is able to distribute the food at cost that isnt too high for user to pay, or willing to pay for. The larger the scale of market demanding for such shipment is the cheaper that Amazon can distribute it, thus the more market grows the better it looks for Amazon, and the worse it looks for retail workers in stores, and on other hand the better it also looks for company owners of retail stores. Its double edged sword like anything that globalization touches, it just depends where person stands in.
The question is: Is there demand for such services that Amazon is willing to provide in regards to food? The answer is straightforward- yes. And the research shows that many users are willing to pay larger margins on bought food just to have it delivered to their home, without need to buy it in retail store. This is the start of the trend, once the costs go lower, the rest of users will be joining in.

The impact on retail store companies

Easier to enter larger market, stores are simply able to distribute large bulks of food to amazon trucks, which would eventually drive prices lower for food as stores would compete in the area to gain distribution. For now its only Whole foods , but soon enough this will envolve many more companies, things like this never end at starting point. In general this means that retail stores would be able to get bigger liquidity in sales and expand into larger distance of user than it would be normally possible. For example an avarage buyer doesnt find it economically to drive 100 miles and paying 10 bucks for gas to get 10 -20 bucks worth of food, but with Amazon shipping of bulk of buyers it would actually make long term edge doing such distrubution as the shipping costs of gas go very low on bulk buying.

It is no surprise that share price of Whole foods jumped up 10 USD, since its very easy to see how company would profit largely from such partnership.

Small private retail stores

This is where globalization usually hits the hardest, it gives positive edge to larger companies and those that carry to little inventory are usually on the loosing edge. Small private business especially on retail store side has been in decline over past 20 years significantly, it is visible from every where no matter which country one lives in.
Practices like this from Amazon will edge towards larger stores with strong inventories which will carry larger potential profits and opurtunity to buy cheaper food, which will further decrease the count of small private stores.

Whole foods investment

Market cap of Whole foods at the moment is 17 billion USD, from investing perspective and value search its always important to check the market capitalization. So the question is, if Amazon is willing to strongly expand current food distribution is there still a positive edge to invest in Whole foods? Food market in US and EU is giant, 17 billion in market cap is relatively drop in bucket, if there is strong demand for such shipping which it is, then market cap of Whole foods could go up exponetially since Whole foods at the moment is one of the few companies that allow such quick and liquid shipping trough Amazon.
From value investing perspective current market cap is still very much undervalued comparing to potential that such shipping can unlock for Whole foods company.