Amazon’s $14 billion deal for Whole Foods gives it more than just groceries. It also gets it crucial real estate it needs to accelerate its delivery operations.
Amazon is buying more than groceries with Whole Foods — it’s also getting more than 400 stores to use as delivery hubs
Prime real estate for Jeff Bezos.
Kevork Djansezian / Getty
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.
Amazon took a big leap into the grocery industry when it announced its intention to buy Whole Foods for $14 billion.
But the deal gives Jeff Bezos something else he craves: More than 400 brick-and-mortar stores that could also serve as same-day delivery hubs, especially in urban centers.
In its ongoing quest to put packages on customer steps as quickly as possible, Amazon has rolled out one-hour delivery in dozens of cities through its Prime Now service.
But there’s a very big obstacle to making the economics work for that business: Finding, and paying for, enough warehouse real estate to cover as many areas of a city as possible to increase delivery efficiency.
This deal could help long-term in this way, even if it’s just to store and supplement the fresh grocery component of Prime Now, which has a relatively small selection today.
Let’s be clear: The main reason to do this deal is because Amazon has been struggling to crack the $800 billion grocery market in the U.S. for going on a decade. Whether Whole Foods becomes the backbone of the AmazonFresh grocery delivery service remains to be seen.
The real estate, however, is nice icing on the cake.
This article originally appeared on Recode.net.
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