Amazon-Whole Foods deal fallout: Can Walmarts, Krogers of the world catch up on the tech side?
Amazon (NASDAQ:AMZN) announced Friday its deal to buy Whole Foods (NYSE:WFM) for $13.7 billion. The acquisition could have a big potential impact on e-commerce as well as brick-and-mortar retailers. Boxed CEO Chieh Huang discussed the deal, telling the FOX Business Network’s Charles Payne, “The margins are so thin in fresh groceries, but Amazon is going in and we were talking about it before, and now we have a company that is not valued on EBIT [earnings before interest and tax] but valued on revenue and so there’s big ramifications for the rest of the industry.”
Payne pointed out that competitors may aim to get government regulators on their side, telling Huang, “Their competitors could push back and ask for some help from regulators, saying, ‘Hey, these guys are going to destroy what thin margins we have to begin with.’” To which Huang responded, “I could definitely see it.”
Payne then proposed that the deal suggests that Amazon doesn’t “see brick and mortar going away, just playing a different role.”
Huang says there is a race to figure out the future of retail and technology’s role.
“The technology folks are trying to figure out retail faster than retailers are trying to figure out technology. And right now Amazon just took a $14 billion shortcut, so all the retailers out there, they’re probably looking for shortcuts for themselves.”
According to Huang, it is difficult for retailers without the speed of a technology company to catch up to firms such as his or Amazon.
“We worked on this playbook for four years at the speed of a technology company. If you don’t move at that speed and you are starting today, it’s going to be a long race for you to just catch up to that.”
When Payne asked if the Walmarts (NYSE:WMT) and Krogers (NYSE:KR) of the world can catch up on the tech side, Huang reacted, “I think at the end of the day, they’re sitting on big cash piles as well, thin margins, but some of these companies have cash to spend so they can spend their way into it but it’s going to take drastic action as you’ve seen from Walmart.”
