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The news rocked the retail industry when it was announced in June – Amazon had purchased the Whole Foods chain, giving the internet giant a brick and mortar presence across the nation.
For the pricey Whole Foods, the announcement instantly neutralized its nickname of “Whole Paycheck,” leading to speculation among analysts that its food prices would drop.
In Westford with a Whole Foods store just a stone’s throw away from a Market Basket the aftershocks could be felt up and down Littleton Road. Whole Foods occupies 40,000 square feet at the Westford Valley Marketplace while Market Basket has 60,000 square feet at Cornerstone Square.
“The retail business in all segments is going through a period of historic change,” said retail consultant Howard Davidowitz, of New York-based Davidowitz and Associates. “Most of the change is being driven by Amazon.”
Across the nation, retail stores are closing. In June CNN Money reported 5,300 retail store closings in 2017 so far. Among them, Payless Shoes, which occupied space at the Westford Valley Marketplace. The shoe store is one of about 400 to close nationwide and one of 11 in Massachusetts.
Demoulas Super Markets, Inc. of Tewksbury, the beloved Market Basket grocery store chain that had built a reputation on low prices, underwent an ownership transition three years ago, after a year of family infighting. The outcome resulted in Arthur T. Demoulas becoming the company’s sole owner. But to pay off the other shareholders, Demoulas took on $1.6 billion in debt.
The obvious question: what does the Amazon purchase mean for Market Basket, arguably the most highly observed chain in Massachusetts with the most loyal customer base?
When reached by phone, Joe Schmidt, Market Basket operations supervisor, deferred comment and did not respond to a subsequent phone call or email.
But Davidowitz surmised that the scenario is not ideal for Market Basket, noting that the retail growth area is online.
“The companies who are going to be in the most trouble are those with the most debt,” he said. “Debt is very bad in retail historically because it’s a business with high volume and low prices.”
Davidowitz predicted that food prices will come down with the Amazon purchase of Whole Foods, and the partnership will pressure other grocery stores to invest in services, such as delivery, which Amazon does well.
“If you’re in the food business and you have a lot of debt, it’s not a good place to be because now you have to invest in food delivery,” he said.
But Andy LaGrega, a principal of the Boston-based Wilder Companies, which manages the Westford Valley Marketplace, had a different point of view.
“I wouldn’t worry about Market Basket,” he said. “They know who their customer is. On the value end they’re the best. It’s the guys in the middle that may struggle.”
In 2014 Demoulas’ Market Basket experienced a six-week customer boycott and work stoppage by most of the company’s 25,000 employees, after a family coup pushed Arthur T. off the board of directors. Ten of his loyal executives were fired, as well. The customers’ and employees’ loyalty to Arthur T. forced the board to negotiate and sell him 50.5 percent of the company.
Local grocery stores in the immediate area include Donelan’s Supermarket in Littleton and Groton, Shaw’s Supermarkets in Groton, and Hannaford Brothers Company and Stop `n Shop in Chelmsford.
As retail editor for Supermarket News, Jon Springer, has a bird’s eye view of the grocery food industry.
“It’s widely assumed they’re (Amazon) making this purchase to get closer to consumers,” he said. “That’s important in food because the cost of filling food orders is expensive…you’ve got perishable food, food that needs to be kept cold, food that needs to be warm.”
Springer noted that Amazon’s major competitor, Wal-Mart, has been integrating its stores with online shopping. The nearest Wal-Mart store is located in neighboring Chelmsford.
“For Amazon having a grocery store is a more convenient distribution point,” he said, adding “…You are seeing that happen…particularly with Wal-Mart.”
But if the two companies’ stock prices are any indication of where investors are putting their dollars, consider this – Amazon’s per share price was $985.92 before the close on Aug. 4 and Wal-Mart’s was $80.37.
Springer sees ultimate success as a blending of the old and new worlds.
“Physical and digital shopping have to come together in order for grocery shopping to work,” he said.
Follow Joyce Pellino Crane on Twitter at joypellinocrane.