Carey Prof: Amazon and Whole Foods “Changes Everything”

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Carey Prof. Liew: Amazon acquisition of Whole Foods "changes everything"

Earlier this month, Amazon made a splash in the retail industry when it announced plans to acquire upscale grocery chain Whole Foods Market. The deal sent shockwaves through the grocery industry and signaled a reboot of Amazon’s effort to sell grocery’s online.

It has also brought questions about the future of brick-and-mortar retail and the role machine-learning and artificial intelligence will play in the future of the grocery business. Carey Business School Assistant Professor Jim Kyung-Soo Liew, who has expertise in finance, quantitative finance, and hedge funds, said the deal “changes everything.”

“Amazon epitomizes a tech company's relentless pursuit of disrupting traditional businesses and comes with a strong historical track record. Amazon has made the online purchasing experience second to none, with low prices for goods and fast delivery, netting a great shopping experience for consumers,” Liew said.

Liew said he expects Amazon to apply the same principles and strategies to Whole Foods, which he said will result in a new kind of grocery experience: “The explosive combination of machine learning and data will change the grocery shopping experience forever,” he said.

“Shoppers' behavior will be a key ingredient that will power Amazon's machine-learning algorithms, which will calibrate new recommendation systems using consumers’ grocery shopping demands. If Amazon allows shoppers to make purchases on mobile phones within the store, this will fuel the algorithms even more,” he said.

Liew said the market’s reaction indicates that Amazon and Whole Foods will integrate successfully as the price of Amazon has risen slightly since the announcement. He added that Whole Foods price increase could also signal a second bidder.

“Typically, the acquirer company’s price performance is flat to slightly down on a merger announcement date, so Amazon being up is a very good sign,” he said. “That Whole Foods prices have drifted higher tells us that lurking behind the scenes could be another bidder or that Amazon may need to raise their original bid to get this deal done. Maybe Walmart will counter after they fully digest how powerful the Amazon/Whole Foods combination will become.”

Liew said the move could serve as a serious disruptor to the grocery industry.

“Other retail grocery stores will now have to move so expect some serious consolidation in this industry. Look for cash-rich technology companies to make bids for traditional brick-and-mortar stores, then applying their deep set of machine learning and AI algorithms on this newly acquired data set,” he said. “One day we will look back at this ‘retail shopping singularity’ event – the deal between Amazon and Whole Foods.”

Posted on June 28, 2017 In