After its $13.7 billion purchase of the organic grocery chain Whole Foods, Amazon pledged to dramatically slash prices of organic food. A press release reads that the e-commerce giant would start offering lower prices to the best-selling grocery staples Monday.
Twitter hailed the news with one user tweeting: “Thanks to Amazon, avocado-loving Millennials can now afford houses.”
Experts think that the merger can only benefit customers. Whole Foods is renowned for its high-quality groceries, while the online retailer is best-known for its customer obsession and discounts.
The retailer did not say how groceries will be cheaper at Whole Foods. The organic grocery chain will morph into a primary venue for new Amazon Prime members. Amazon wants to integrate its logistics system in the Whole Foods world, which could lower costs. Amazon might as well sell Whole Foods produce online.
Was This a Bad Aquisition for Amazon?
What’s more, Amazon is accustomed to razor-thin operating margins, which could help it reach its price goals. The idea is not new in the retail sector. However, while lowering prices will surely keep customers happy, shareholders will need to see a justification for the company’s largest acquisition to date.
Some experts are concerned that the acquisition was not an inspired move, as bad acquisitions are quite a standard occurrence in the tech world. For instance, Yahoo shelled out $1.1 billion for Tumblr, Google paid $2.5 billion for Motorola, Microsoft forked out $6 billion for an ad company nobody ever heard of, and AOL purchased Netscape.
Some mergers were a lousy idea from the start, but others made sense at the time of the acquisition to fail during the execution. What’s more, most of these examples concern two tech companies. It is extremely rare for a tech company to buy a grocery store. So, we’ll keep our fingers crossed, Jeff Bezos.
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