Amazon and Walmart Poised for Online Retail Battle

Web retailer Amazon is poised for a face off against Walmart after the online giant bought up the grocery store chain Whole Foods for $13.7 billion in cash Friday.

Walmart’s in-store food grocery aisles and purchase of online retailer Jet.com for $3 billion last year show that the lines are blurring between online stores and their bricks-and-mortar counterparts.

The clearest signal of Amazon’s grocery store ambitions came last December when it unveiled it’s Amazon Go idea — a roboticized supermarket where algorithms helped customers track their purchases with a touch-out checkout line at the end of their shopping.

Amazon’s purchase of Whole Foods sent the grocery chain’s stock price soaring from $33 to $42 in trading Friday. Amazon first opened a series of brick-and-mortar bookstores in 2015.

Whole Foods focuses exclusively on foods without artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats. Amazon is expected to lower the store’s prices to compete for Walmart’s customers.

RTS179WJ Amazon has ventured into brick-and-mortar retail, pitting it against large retail chains like Walmart. Shannon Stapleton/Reuters

A price war is already underway with German discount food stores Aldi and Lidl undercutting Walmart’s prices and encroaching on the company’s 22 percent stake in the American grocery market.

Read more: Brick-and-mortar retailers in a death spiral against online stores

But Walmart is “playing offense," said Marc Lore, Walmart's e-commerce chief and founder of Jet.com, in an interview with Reuters. The company recently purchase e-retailers targeting high-end shopper, such as Moosejaw, Modcloth, and then Bonobos last Friday in an effort to cut into their customer base.

Walmart is testing out  same-day grocery delivery from 10 of its stores. "We see an opportunity to do a lot more of that," Lore said.

Similarly Amazon will use Whole Foods as a staging ground for building the grocery store of the future, said Brittain Ladd, who until March headed Amazon’s brick-and-mortar strategy.

Whole Foods, he said, will be angling to offer home delivery and curbside grocery pick up from its stores for online purchases.

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