The announcement that Amazon was to take over Whole Foods Market sent a shudder of fear through many other retailers, but news of how the deal came about has given those retailers hope.
Hope that they might be next.
Bankers report an upsurge in requests from their retail clients asking that they put a call in to see if Amazon would be interested in acquiring them, too. […]
The calls to mergers and acquisitions bankers have ratcheted up this summer, according to more than five advisers who were contacted by clients. Requests that bankers put out feelers to Amazon have come from apparel, grocery and convenience store companies, they say.
(Highlights by me.)
If you can‘t fight them, join them.
“All these desperate retail companies think that the solution to their problems will be solved by Bezos . . . they are all praying for a new ‘Amazonian’ era of retail . . . in which they are members of the [Bezos] club,” says another banker.
The Financial Times is speculating what companies Amazon might buy next, but they only talk about US companies. (restaurant meal delivery service GrubHub and retailers like Bed Bath & Beyond or Target are floated) In my estimation, it is far more likely that Amazon will instead make an acquisition on a similar scale in a mature market like the UK (maybe Ocado?) or Germany.
Far more growth bang for the buck.
If the company will keep pursueing this strategy, that is.
It also makes no sense for Amazon to buy a really large retailer like Target (that legacy cost structure!) or a fashion retailer like Nordstrom. Whole Foods is about perishable food (and Echoes nowadays, apparently). A similar move in fashion retail makes no sense at all. None.
The market context for all this is of course the ongoing retail meltdown in the US:
US department store sales have dropped 18 per cent since 2010, according to Bank of America estimates, while PwC expects at least 90m sq ft of retail space will be closed this year.
Bankers are rightly cautious though:
“Amazon is on its own path and will not just keep on buying for the sake of it,” says a banker working in the retail sector. “Historically they have been deal shy and anyone thinking that they will be saved from Amazon is wrong.”
For now, at least, Whole Foods-Amazon is the exception, not the rule.