Amazon has already been expanding its Fresh grocery delivery business in European cities such as London and Berlin, but its purchase of a bricks-and-mortar supermarket chain, even one as small in Europe and high-end as Whole Foods, raises the prospect of tougher competition and more acquisitions.
"To hear that it's actually buying an existing retailer confirms its intentions in the area and that obviously leads to further competition in what is already a fiercely competitive market," said Laith Khalaf, an analyst at Hargreaves Lansdown.
Large European retailers' shares were down in afternoon trading. Ahold Delhaize closed down 9 per cent in Amsterdam due in part to its large US exposure, but Tesco was down 5 per cent in London and Carrefour was down 3 per cent in Paris.
The news shook a grocery sector that is already grappling with consumer unease, currency volatility, geopolitical uncertainty and increased competition from the German hard discounters Aldi and Lidl.
Shares were already wobbly on Friday following a big profit warning from Kroger, the largest US operator.
"People are very nervous. And then they see this and they think — 'if online is going to kill offline, what am I doing in the sector? Sell'," said Fernand de Boer, analyst at Petercam in Amsterdam.
The news also has implications longer term, as some saw the acquisition of Whole Foods, whose only European stores are nine in Britain, as merely a first step.
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