Walmart won't battle Amazon for Whole Foods for a very simple reason

Walmart employeesJ.D. Pooley / Stringer/ GettyWalmart doesn’t need to challenge Amazon’s $US13.7 billion bid for Whole Foods.

Walmart isn’t planning to challenge Amazon’s $US13.7 billion bid for Whole Foods, Reuters reported Friday, citing a source familiar with the matter.

The news comes amid growing speculation that another company will try to outbid Amazon for the grocery chain, with Walmart repeatedly cited as a top contender.

But that speculation has been wildly off base, according to some analysts.

Here’s why: Walmart doesn’t need to buy Whole Foods to dominate the grocery market. It’s already the top grocery chain in the US by a long-shot, with 21% market share, compared to its next-closest competitor, Kroger, which claims a 10% share of the grocery market in the US.

Whole Foods, meanwhile, has just 1.4% of grocery market share, and Amazon has a 0.2% share.

That’s not Walmart’s only advantage. Walmart has a bigger physical presence in the US than any other grocery chain, with 5,330 locations throughout the US within 10 miles of 90% of the population — and it’s still continuing to grow and open new stores while other retailers are shrinking.

Moody’s Investors Service expects that over the next several years Walmart’s food business will “accelerate at a rapid pace, with buy online/pick-up-in-store its latest weapon.”

The bottom line? Amazon acquiring Whole Foods won’t give the e-commerce giant “any discernible edge” over Walmart, according to Charlie O’Shea, lead analyst for Moody’s.

That’s why it’s so unlikely that Walmart would counter Amazon’s offer for Whole Foods.

“We have been asked by investors and media over the past few days, in almost breathless tones, ‘What does Walmart do?’ and ‘Isn’t Walmart scared?'” O’Shea said in a recent research note. “Realistically speaking, a challenged $US16 billion food retailer is merely changing owners. And Walmart, already the world’s largest retailer, also is the world’s biggest grocer.”

NOW WATCH: Scott Galloway explains exactly why Amazon would buy Whole Foods (when he predicted it last month)

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