>> For Amazon, buying Whole Foods for $13.7 billion is just the start. I'm Reuters' Jeffrey Dastin. Amazon may be the expert at delivering books, electronics and virtually all other products to shoppers' doorsteps. But in grocery, it faces a much more daunting challenge. Grocery, first of all, is more complicated for storing in warehouses.
Some warehouses require certification from the U.S. Food and Drug Administration. You have to make sure that areas are sealed off so pests like mice aren't coming in and spoiling food. But aside from the specifics and complications of just housing grocery, Amazon is decades behind its large rivals in terms of investing in grocery-specific fulfillment centers.
And that, experts say, is critical if Amazon wants to take a large bite out of the $700 billion U.S. grocery market. This means that Amazon, which for a year now has stepped up its investment in fulfillment centers and that has weighed down on its profits. We'll likely continue to spend on building new facilities, new distribution warehouses, if indeed it wants to make a play in grocery.
While many have commented that Whole Foods stores themselves could serve as miniature fulfillment centers so to speak. That actually is very challenging. These stores are often in malls. There is little floor space. And so while you could deliver an occasional order from online to customer's homes from Whole Foods, staging thousands of online orders is another challenge.
Distribution may also be key to helping Amazon lower prices at Whole Foods. Amazon is a guru in supply chain and other areas, so experts think it will look at the supply. Hopefully takes from United Natural Foods, Inc., and then from any other companies and see if it can lower cost and pass that onto customers.