Wal-Mart in the Crosshairs of Amazon's Takeover of Whole Foods
June 16 2017 - 11:20AM
Dow Jones News
By Sarah Nassauer and Imani Moise
Amazon.com Inc.'s purchase of Whole Foods Market Inc. isn't just
a $13.7-billion bet on physical grocery stores. It is a direct
strike at the world's biggest retailer: Wal-Mart Stores Inc.
Wal-Mart generates more than half of its $486 billion in annual
revenue from groceries and is the country's largest grocer. But the
company has been ramping up its digital business with a string of
e-commerce acquisitions as its battles Amazon for customers.
Wal-Mart shares fell 6% in early trading, as did other big
traditional grocers. The decline erased nearly $15 billion in
Wal-Mart market value, or more than what Amazon is spending on
Whole Foods. Costco Wholesale Corp. dropped 7.8% while Kroger Co.
plunged 15%.
On Friday morning, five minutes after Amazon's megadeal was
announced, Wal-Mart completed another small web purchase: It said
it was paying $310 million for online menswear retailer Bonobos,
known for its $98 chinos. It's the fourth small e-commerce
acquisition for Wal-Mart this year.
The rivalry heated up last fall as Wal-Mart bought Jet.com for
$3.3 billion and put the startup's founder Marc Lore in charge of
its e-commerce operations. Mr. Lore, who had sold a previous
startup to Amazon, vowed to use his Wal-Mart perch to take on
Amazon.
In its most recent quarter, Wal-Mart said e-commerce sales
surged 63%.
Mr. Lore has since engineered a series of small acquisitions,
adding niche online chains that appeal to wealthier or more
fashion-forward shoppers than Wal-Mart's core customer such as
Moosejaw and Modcloth. Wal-Mart has also ramped up efforts to use
its stores to ship online orders and is expanding to hundreds of
stores an online grocery pickup service.
Since the beginning of the year, its website has rolled out
two-day free shipping with no membership fee to compete with the
popular Prime program offered by Amazon.
Wal-Mart's digital push is an extreme departure for its
historical model of building hundreds of new stores each year to
grow sales. The shift has ruffled some feathers internally and
externally, say people familiar with the situation. Billionaire
Warren Buffett sold off the majority of his long-held Wal-Mart
stock in the wake of the shift.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Imani
Moise at imani.moise@wsj.com
(END) Dow Jones Newswires
June 16, 2017 11:05 ET (15:05 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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