The new rivalry between Amazon, Walmart post Whole Foods deal

After Amazon announced its plans to buy upmarket US grocer Whole Foods Market in a massive $13.7 billion deal last weekend, Charlie O’Shea, a Moody’s lead retail analyst, told the Associated Press news agency that the deal could be “transformative, not just for food retail, but for retail in general”. If we look closely at what O'Shea said, the statement dovetails with the current rival notes between Amazon and Walmart.

Amazon, largest e-commerce company and Walmart, world’s largest brick-and-mortar retailer,  have been strategically planning a foray into each other's territory for quite some time. Walmart's purchase of online retailer Jet.com for $3 billion last year was perhaps beginning of this rivalry. Now Amazon has answered with its $13.7 billion purchase of grocery chain Whole Foods Market.

As O'Shea said, the ramifications of the two deals will be 'not just for food retail, but for retail in general'. Thus, it is no longer about the forte in the offline space or the dominance in the e-commerce world but who strikes the perfect balance between the offline and online to reign the sector.

Groceries accounted for 56 percent of Wal-Mart's $486 billion in revenue for the year ending Jan 31. And Amazon's latest acquisition will give it over 460 stores as test beds to learn how to compete with Walmart’s 4,700 stores with a large grocery offering. Whole Foods will also aid Amazon with its wealth of institutional knowledge about physical retail, something e-tailer is still figuring out.

Walmart, on the other hand, has been juggling in the opposite direction. It has been incentivizing online shoppers to drop by a store to pick up their items in order to lower the ticket price, and it’s now turning its store staff into delivery drivers who can drop off online orders as soon as the next day. The retailer is also going after Amazon's higher-income shoppers with a recent string of acquisitions of online brands such as Moosejaw and Modcloth and on Friday, menswear e-tailer Bonobos.

Th point is simple. Both the companies know that the future of shopping will be a curious mix of both e-commerce and physical retail. Because while online shopping is hassle-free, sometimes, seeing products in your hands is more convenient or even just quicker than searching a website and waiting for delivery.

Meanwhile, Amazon is expected to lower Whole Foods' notoriously high prices, enabling it to pursue Walmart's customers. On the other hand, let's see how Walmart leverages its position in the apparel industry with Bonobos.