Amazon Robots, a new Innovation for Whole Foods Warehouses

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Amazon Robots, a new Innovation for Whole Foods Warehouses

HEALY: It's a good opportunity to get out of the house and stretch the legs and, you know - I like - I'm a very visual person, so I have to look around and see everything I'm looking at.

"If you're a retailer, I think you keep your eyes wide open", Froneberger said. It has four "365 by Whole Foods Market" stores that are cheaper to build and operate than a traditional location and offer lower-priced items aimed at younger shoppers. That fits with Whole Foods private-label push to compete on price, and gives Amazon a bigger foundation on which to develop its own food brands. It's been experimenting in Seattle with a convenience store with no cashiers, called Amazon Go.

That could help Amazon both cut shipping costs and draw more customers into Whole Foods locations.

Not even the proposed tie-up between Amazon and Whole Foods is without its problems.

Analyst Tuna Amobi of CFRA Research, who maintains his "buy" recommendation on the stock, said the Whole Foods acquisition could presage a major long-term disruption of the grocery business as Amazon "further leverages its technology, logistics and fulfillment infrastructure".

At the same time, the supermarket industry itself is facing challenges, as companies like Kroger post disappointing earnings and the prospect of price wars looms with the entrance of Germany's Lidl, which plans to have 100 stores in the U.S. by this time next year, and the expansion of discount stores like Aldi, which plans 2,500 stores by 2022, up from 1,600. As Amazon's business has grown, its warehouses have become more specialized. Year after year, these warehouses have grown to be more specialized with inventory that is within driving distance of big cities.

Amazon has added plenty of robots to enhance operations, but it has still managed to retain many of its workers as its workforce had increased 43% by the end of March compared to a year ago, amounting to 351,000 employees. Potentially onerous final mile costs make online grocery sales nearly an exclusively urban phenomenon, Brown says. "But you need to put fresh food on the table", said Lloyd Greif, a Los Angeles investment banker and president and CEO of Greif & Co.

As of this time, Whole Foods, Amazon, and Walmart had not yet responded to Reuters for comment.

"I think retailers are going to have to bring a lot of excitement to the store", said Stew Leonard Jr., CEO of Stew Leonard's, a grocery chain with five locations in CT and NY.

Walmart, which has the largest share of the US food market, has already been pushing harder into e-commerce to build on strength in its stores and groceries.

"The goal will be to create as advanced a distribution capability as possible to provide customers with exceptional service and the freshest of fresh produce, vegetables, and meat", Ladd said. That's how many employees Wal-Mart had at its latest update.

"The food stores would be ideal outlets for popular Amazon products, such as Echo, Fire TV and Kindle, given the favorable demographics of the customer base", said Pachter. All of these places are expected to be affected. Thompson speculates that it will make it feasible for Amazon to deliver groceries, including perishables, any way the customer wants.

Instead, it may be Amazon's technology that could make grocery stores completely obsolete, devastating not just cashier jobs but also management and back office positions. They are billed automatically based on what they pluck from shelves.

"Overall, we view the price paid by Amazon for Whole Foods - representing a forward enterprise value/EBITDA multiple of 11 times - as reasonable, and we plan to raise our fair value estimate to $1,200 a share from $1,050", said R.J. Hottovy, consumer strategist at Morningstar. Both sources spoke on condition of anonymity because the matter is confidential.

Amazon has good reason to move slowly with automating tasks now done by people. Whole Foods accepted the bid.

It goes without saying that should the deal go through, the role of Azure at Whole Foods will surely diminish.

"If there's an environment of uncertainty, like layoffs due to automation, unions can play on that fear", Pryzbylski said, and make inroads in unionizing the workforce.

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