Now that the dust has settled on Amazon’s acquisition of Whole Foods we are starting to see the customer-facing changes that are being made in merged company. While some speculated this was the dawn of a new era of U.S. grocery retail, is this really the seismic shift that was the headline in many media reports? Or is it something smaller – a localized tremor that will impact some retailers, but leave the broader landscape largely intact?

An Admission of Defeat?

To be sure, the acquisition of a struggling high-end brick-and-mortar grocery retailer by a (until recently) pure-play online marketplace giant, came as something of a surprise, not least because of the speed at which the deal progressed from signing to close. However, the portents of doom for national retailers like Wal-Mart and Kroger, are overstated.

Rather the Amazon-Whole Foods deal seems to be an admission of defeat by both entities. For Whole Foods, an admission that it had lost its advantaged position as a premium organic grocer against its more mainstream competitors who have successfully pushed into the organic space in recent years. And for Amazon, an admission that it could not crack the nut on being a pure-play online grocery retailer, particularly in the faster-growing fresh categories that make the logistics of last-mile delivery particularly challenging and costly.

Even gazing a few years into the future, it is hard to see the deal, on its own, impacting national retailers in any meaningful way. Whole Foods has less than five hundred stores today. With an aggressive expansion strategy that doubles its store count, it would still have only a fraction of the store footprint of Wal-Mart or Kroger’s stable of banners.

The Real Impact

The players that will be most impacted by the deal are the local and regional retailers that have the misfortune of operating in markets where Whole Foods have a store presence. Amazon slashed Whole Foods prices by as much as forty-three per cent the day the deal closed. Within a week it had installed Amazon lockers at select Whole Foods locations, and is looking to leverage Whole Foods’ footprint to display its own wares, including an entire display of (farm fresh?) Amazon Echo devices in the Produce section at its Chelsea location in Manhattan (hopefully only because it is the first section one walks into at that store). It is this fearsome speed of execution that will make it extremely difficult for local retailers, like Gristedes and the already struggling Fairway Market in New York, to stay competitive in the long run.

Also impacted (albeit somewhat less so) will be local retailers in markets without a significant Whole Foods presence today, who will now have to compete with online delivery of Whole Foods store brand products through Amazon.

And finally, there is Trader Joe’s, whose reputation and popularity is driven in part by being perceived as the low-cost alternative to “whole paycheck” Whole Foods. How long will the quirky private label-heavy chain with the Hawaiian shirts and Two Buck Chuck be able to hold on to its loyal customers in the face of Whole Foods’ newly competitive prices?

Overall, while the Amazon-Whole Foods deal is undoubtedly significant for grocery retail in the U.S., its impact will likely be more localized than widespread. At least until Amazon’s next big acquisition.