On June 16, Amazon announced its intention to acquire Whole Foods for US$13.7 billion, signaling not only a commitment to expanding its retail ambitions, but also its belief in leveraging digital to transform business models. Given the wide array of businesses Amazon has successfully created beyond its traditional e-commerce model, this acquisition may lead to a complete transformation of the broader grocery retail model.

This viewpoint provides an assessment of the proposed acquisition and explores Amazon’s thinking behind the acquisition. Amazon has been making select investments to test brick-and-mortar models by opening Amazon bookstores, conceptualizing Amazon Go, and launching AmazonFresh delivery service. With the acquisition of Whole Foods, Amazon can rapidly expand its physical scale in retail and use an assortment of digital technologies (mobile, IoT, analytics, automation, cloud, etc.) to create a scaled and smart retail grocery model.

The key themes the report explores include:

• Expectations in a tough segment
• Levers to unlock value
• Existing investment in the brick-and-mortar model
• Optimization of previous grocery delivery models
• Digital disruption in the grocery market
• What to watch on the journey

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