By Diane Cooke
Investors are grossly overestimating the impact to Walmart of Amazon's purchase of Whole Foods, according to Moody's.
Amazon's offer in June of $13.7 billion, or $42 a share, for the natural and organic grocery chain wouldn't give the ecommerce giant "any discernible edge" over Walmart, wrote Charlie O'Shea, lead analyst for Moody's Investors Service.
"We have been asked by investors and media over the past few days, in almost breathless tones, 'What does Walmart do?' and 'Isn’t Walmart scared?'" O'Shea said. "Realistically speaking, a challenged $16 billion food retailer is merely changing owners. And Walmart, already the world’s largest retailer, also is the world’s biggest grocer."
On the same day that Amazon announced the Whole Foods buy-out, Walmart confirmed it would buy the men's clothing brand Bonobos for $310 million. And so the intense rivalry goes on.
Amazon had been dabbling with traditional brick-and-mortar activities for a few years already - from owning a few physical stores to running experiments like “Amazon Fresh” and “Amazon Go”.
When the news broke, critics saw it as a sign that the company had finally caved and made a large investment into physical stores in order to grow. What many didn’t see, however, is that this acquisition is, in fact, in complete alignment with Amazon’s view of the world of retail, writes Forbes.
On an episode of Too Embarrassed to Ask, Kara Swisher spoke with Recode’s business journalist Jason Del Rey about Amazon and Walmart’s ongoing rivalry.
“There’s totally room for both of them,” Del Rey said. “I think you’re going to see Walmart, especially if this Whole Foods deal goes through ... You know, they’ve been making a big push in grocery, I think they’re really going to push that hard.”
Whole Foods gives Amazon a stronger physical presence in urban centres and in well-off suburbs, while Bonobos is one of many recent e-commerce plays Walmart has made recently. Del Rey said that, starting with its $3 billion purchase of Jet.com last year, Walmart and Jet CEO Marc Lore have made it their mission to bring top digital talent in-house.
“You don’t spend $3 billion on a very young business that had not proven it was sustainable in any way on its own if you feel like you’re in an even average position,” he said. “They’ve made some smaller acquisitions, and a big piece of that is bringing in good digital leadership that probably wouldn’t go to work at Walmart otherwise. Andy Dunn, who’s the co-founder and CEO of Bonobos, would he have gone and worked at Walmart if Marc Lore wasn’t there? He has said publicly, no.”