June 16, 2017. This is a day many retailers can clearly remember. Friday morning’s sleep was interrupted by the surprise announcement that e-commerce giant Amazon was going to buy organic grocer Whole Foods. The upheaval was immediate. The news not only sent shares of grocer Kroger into a tailspin, a broad swath of retail stocks, including Target and Walmart, lost millions and millions in market value that day. When the closing bell rang, Kroger shares were down 18.9%. At the time, it was the stock’s biggest drop in nearly 18 years. This scenario has cropped up at other times as well, with Amazon taking its early forays into health care. It agreed to acquire online pharmacy PillPack in 2018 and announced Amazon Pharmacy in 2020. Both headlines sent a jolt through traditional pharmacy stocks like CVS and online competitors like Walgreens Boots Alliance and GoodRX. The fear factor has rapidly faded by Thursday. Amazon announced that it will buy 1Life Healthcare, which provides primary health care and telemedicine services under the One Medical brand. The deal marks an even deeper step into health care services, but market reaction was mild. Shares of telehealth provider Teladoc Health were up slightly at the start of the day, but ended Thursday with gains of 1%. DA Davidson analyst Tom Forte cited two primary reasons for the trend, saying, “Over the past two years, Amazon entering a category hasn’t inspired the fear it has historically.” The first is Amazon Web Services, which Forte says has proven Amazon can work with companies rather than destroy them. “The poster child for this is Netflix,” Forte said. Although Amazon has put a lot of money into its Prime streaming service, Netflix’s main issue isn’t Prime, he explained. This is the cumulative effect of the entire competitive landscape, including new rivals like Disney+ and HBO Max. But Forte sees an even bigger reason: “Amazon’s inability to do what Kroger does to the limitations in books, or Circuit City in electronics, or Toys R Us in toys — may be the best example,” he said. Amazon spent $13.7 billion to buy Whole Foods, and has invested untold amounts in building other grocery services such as Prime Now and Fresh & Go, but the company remains a minor player in the highly fragmented industry. Walmart is still the largest grocery seller in America. Walmart increased its market share to 20.9% in the 52 weeks ended June 30, according to research firm Numerator. Next comes Kroger, which controls about 9% of US grocery sales. Whole Foods and Amazon.com each captured less than 2% of the market. (Amazon.com’s share, which includes online Whole Foods orders, was 1.6%, while Whole Foods was up 1.3%, the numerator said.) Jassi has made a move. The $3.9 billion acquisition of One Medical ranks as Amazon’s third-largest deal behind Whole Foods and the MGM transaction. And it’s a big strategic move for CEO Andy Jesse, who spent his first year on the job. Amazon’s revenue growth has slowed, and in April it posted its first quarterly loss since 2015. Since the start of the year, Amazon stock has lost nearly a quarter of its value. One Medical could help Jacquie build an Amazon Care business and is being seen as a vehicle to provide more health care services over time. JMP analyst Nicholas Jones wrote in a research note, “While One Medical will not be a meaningful contributor to revenue in the near term, it does provide AMZN with more touch points with patients, especially as medical decisions are being made.” Both are preventive and reactionary.” Thursday. “Accordingly, the acquisition should drive growth and adoption of Amazon Care and Amazon Pharmacy solutions.” Amazon Care offers personal and virtual health services in five US cities so far, according to a research note by Stifel analyst Scott DeWitt on Thursday. Amazon Care plans to expand to 15 more locations by the end of the year. One Medical’s network will significantly expand that reach, as it operates a network that serves more than 125 US locations. The company provides 24/7 care to approximately 767,000 customers and has partnered with over 8,500 employers to provide benefits. Revenue comes from three sources: member membership, providing patient services, and through partnerships. The subscription element is novel because it gives patients the ability to have preferred access to appointments for an annual fee. This brings up another important point: One Medical is still a young company, and its purchase won’t automatically give Amazon tremendous scale in this area. This fact cannot be lost on investors who have seen how long it is taking Amazon to enter the health care industry. “They’re not buying Aetna,” said DA Davidson’s Forte. In other words, Amazon’s power to disrupt the industry will take years, if not months. In December 2020, analysts at Raymond James looked at 47 stocks across 19 industries where Amazon has expanded over the past few decades, and found that the stocks underperformed the broader Russell 3000 in 30 days and included news of Amazon’s entry. did. From 1.9%. In the 30 days following the announcement, shares outperformed 1.9%, effectively wiping out an Amazon selloff. Although One Medical is “a startup,” Forte said he’s still excited about the potential for Amazon to use it to build a bigger presence in health care, which has a huge addressable market. Analysts see several ways for Amazon to grow the health care business. Forte said Amazon has an opportunity to add physical pharmacies to its Whole Foods store. Stifel noted the possibility of adding health care services to the Prime membership offering. Bernstein’s analysts suggested One Medical’s business could benefit from “cross-selling synergies” with Amazon’s pharmacy business. Spoilers ahead? David Larson, an analyst who covers 1Life Healthcare at BTIG, warned that another bidder could emerge. In early July, Bloomberg reported that One Medical was considering its options after being approached with a takeover proposal. “Given the high-quality nature and ‘reasonable’ value of OneM’s services, it is possible that other bidders could emerge, including a major health plan such as CVS Health (CVS, NR), or UnitedHealth Group (UNH, NR).” Larsen wrote in a research note. The Bloomberg report said talks with CVS were no longer active. CVS stock closed down 1.5% on Thursday. UnitedHealth ended the day up 0.6%. Amazon did not say when it expected the deal to close. Closing is subject to approval from A Medical shareholders and regulators. Analysts don’t expect the deal to be hampered by regulators. One Medical has a small share of the market, possibly less than 1%. Its stock closed up 69% at $17.25.