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Why does this acquisition make sense? Moms and Whole Foods.
Amazon’s feud with Walmart is no secret. The e-commerce giant has grabbed a significant market share from the once-undisputed leader in retail. In response, Walmart has transformed the dynamics of its business, focusing its effort on competing with Amazon by offering fast, free shipping.
Amazon has prevailed over the year and is now predicted to go for the knock-out blow by purchasing the enemy of its enemy: Target.
At least, that’s what Loup Ventures co-founder Gene Munster surmises in his tech predictions for 2018 report. He gives two reasons for why Amazon would want to acquire the big-box retailer: moms and Whole Foods.
“Target is the ideal offline partner for Amazon for two reasons, shared demographic and manageable but comprehensive store count. As for the demographic, Target’s focus on moms is central to Amazon’s approach to win wallet share,” Munster wrote. “Amazon has, over the years, aggressively pursued moms through promotions around Prime along with loading Prime Video with kid-friendly content.”
He continued, “As for retail stores, Amazon’s acquisition of Whole Foods 470 stores along with testing of the Amazon Go retail concept is evidence that Amazon sees the future of retail as a combination of mostly online and some offline.”
Muster goes on to claim the deal would be approved despite anti-trust laws. Amazingly, even if Amazon did purchase Target, its combined market share of 13 percent would be dwarfed by Walmart, which owns around 23 percent of the market. Amazon would still only own about 2,300 brick-and-mortar locations including Whole Foods, much fewer than Walmart’s 11,695.
The prediction comes as Citi analysts said there was a 40 percent chance that Apple would purchase Netflix. Much like that prediction, Munster’s is entirely speculative, based not on hard evidence but strictly on market research. It appears even Munster has his own reservations about the Target prediction, calling it his “boldest” of 2018.
We should also note that Munster is best known for badgering Apple on conference calls about its rumored in-house TV, not the streaming box but a mythical display. His predictions on Amazon should, therefore, be looked at with a healthy dose of skepticism. Still, Munster’s musings have a significant impact on the market, as is evident by the rise in Target’s stock caused by those who are convinced by his arguments.
Munster suggests Amazon would pay a 15 percent premium on Target’s value, or $41 billion—only about 8 percent of Amazon’s current $564 billion market cap.
Phillip Tracy is a former technology staff writer at the Daily Dot. He's an expert on smartphones, social media trends, and gadgets. He previously reported on IoT and telecom for RCR Wireless News and contributed to NewBay Media magazine. He now writes for Laptop magazine.