![]() ![]() In a way, this strategy continues a pattern I wrote about several years ago, which is Amazon following in the footsteps of the last century’s retail behemoth, Sears. Amazon is trying to become Walmart-not just an online megalith, but also a physical retail powerhouse with dynamic pricing and stocking strategies-faster than Walmart can become Amazon. It bought 431 upper-income, prime-location distribution nodes for everything it does,” tweeted Dennis Berman, the Wall Street Journal’s financial editor. “Amazon did not just buy Whole Foods grocery stores. Several analysts have said that Whole Foods’ urban and suburban locations are so valuable for Amazon’s delivery business that the deal could be worth it even if the grocer all but stopped selling food. Second, this is about Whole Foods as a distribution hub-and Amazon as a physical retail presence. The merger might be even worse news for Instacart, the grocery-delivery service that has had a close relationship with Whole Foods. Stocks for Kroger, Costco, and Dollar General all fell more than six percent within the hour. Indeed, news of the partnership sent grocery competitors’ stocks plummeting. If Whole Foods follows the Bezos playbook, shoppers can expect prices to fall, and investors will expect revenue to rise. The Whole Foods purchase is a $14 billion bet on the future of food that comes in boxes.Īmazon is terrifying for its competitors in part because its low-margin business pulls each industry it dominates into a kind of deflationary whirlpool. Maybe Prime members would get deals on Whole Foods produce, and they could elect to have the fresh veggies and organic dips delivered to their homes and apartments. With Whole Foods, which will continue to operate under its own name, an Amazon Prime subscription might operate just like Costco membership. In the last few years, Amazon has expanded its online grocery business, AmazonFresh, but it hasn’t quite mastered online groceries the same way it’s mastered books and media. A study commissioned by the market-research firm Euromonitor for Blue Apron’s public filing projects that the online market is projected to grow 15 times faster than the rest of the restaurant business through the end of the decade. That’s why grocery stores and restaurants are seeing fewer shoppers and diners passing through their shops, as Americans are ordering more of their produce and meals online. Amazon understands that the most important value in American retail today is what’s is technically known as “consumer convenience” and what is commonly observed as “human sloth.” E-commerce is soaring and food-delivery businesses are taking off because human beings are fundamentally lazy and they don’t want to leave the couch to buy stuff. But then again, Amazon always seems to be not just several moves ahead of its competitors, but playing another game entirely-chess versus checkers, as they say-so it’s worth thinking through some of the more long-term, hypothetical implications of this deal.įirst, this is about food as a delivery service. That’s the most straightforward analysis. In short, Whole Foods was in a free fall, and Amazon is the perfect net to catch it. That’s true-almost as terrible and low-margin as e-commerce, where Amazon has already demonstrated that it can hypnotize Wall Street’s myopic financiers, while it spends tens of billions of dollars building a global warehousing and delivery infrastructure for a shopping future that is moving online. That Whole Foods ended up with Amazon is poetic justice, considering that, in 2015, CEO John Mackey said Amazon’s move into grocery delivery would be “Amazon’s Waterloo.” Doubters of Amazon’s strategy can point to the fact that groceries are a terrible, low-margin business. Investors had for weeks been pushing the company to sell itself to a larger grocer, like Kroger. Meanwhile, the grocer is in a tailspin, its stock price cascading as revenue growth has fallen every year since 2012. ![]() Whole Foods, meanwhile, offers the biggest name in yuppie groceries and a fleet of urban locations, which can double as Amazon warehouses. The e-commerce giant has been expanding into groceries and physical locations, including bookstores, ironically working itself back into the brick-and-mortar business that it’s also disrupting. Amazon needs food and urban real estate, and Whole Foods needs help. At the simplest level, the deal represents a straightforward confluence of interests. The purchase holds implications for the future of groceries, the entire food industry, and-as hyperbolic as this might sound-the future of shopping for just about anything.īut let’s not get ahead of ourselves. ![]() Amazon announced on Friday morning that it’s buying Whole Foods for just under $14 billion, the retailer’s largest acquisition ever. ![]()
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