I guess that bet on brick and mortar paid off for Amazon; as our go-to online store just picked up a tiny grocery chain you may have heard of called Whole Foods. And for the low Prime price of $13.7 billion mind you (thank God for free shipping).
Now you may be wondering, why would Amazon (known widely for its competitive prices) buy Whole Foods (known widely for the fact that you need to mortgage your house to buy a gluten-free, vegan, organic, free range avocado.). Don’t worry – I was wondering the same thing.
Here’s what I’m thinking:
- Wal-Mart (you remember Wal-Mart right?) is probably the closest competitor that Amazon has in terms of size and fulfillment and logistics capabilities. While Amazon has 70 distribution centers in the US, Wal-Mart has 4,177 stores in our beloved United States. In essence, Wal-Mart has 60 times the distribution capability as every one of their store can serve as a fulfillment center. Amazon’s purchase of Whole Foods will, in essence, give it 490 distribution points to support its Pantry and Fresh service. Nowhere near the distribution capability that Wal-Mart has yet to unleash, but they are going in the right direction.
- This move also opens the assortment of organic, vegan, free-range, gluten free and in general healthy funny sounding (and smelling) foods Amazon needs to bring it’s Pantry/Fresh business to the next level. While Whole Foods is going to remain a separate business unit, you know that mama bear Bezos is going to leverage the vendor and supply chain that has helped build the (overpriced) healthy food movement to create an even faster delivery system as well as an expanded product line.
- Finally… I’ve probably mentioned in a few asides up there that Whole Foods is expensive. Like stupid expensive. How does the world expect America to get healthy when it’s cheaper to get a burger at McDonalds than a bag of brown rice at Whole Foods… that’s for a different post. Amazon, for all intents and purposes is a data machine. Yes, they are a retailer, but what they have is data on everything – and TheStreet.com was quick to point out that Amazon can use this data to help Whole Foods better stock their stores and become more efficient in their inventory systems driving the product cost lower… boom… you’ve been Amazoned. Wal-Mart has been using data like this for years. We all know the story of how it uses weather data to predict when to send certain products to certain stores (I believe there was one instance where they send extra strawberry PopTarts to Georgia during hurricanes? Don’t quote me on that). Wal-Mart’s problem is nailing down the fulfillment side of things – which Amazon continues to excel in.
- In the theme of Amazon being a data machine – not only has Amazon accumulated enough data on us through our online purchase habits that it can pinpoint that I’m about to be a parent, or that my anniversary is coming up and my wife will really like a particular item – they will now have a plethora of additional data points through the retail shopping experience. Just imagine what they will be able to do when the ultimately expand their brick and mortar footprint. I mean, they already have their pop-up shop that is almost fully automated and cashier free. Only time will tell what customer experience improvements they’ll make to the “IRL” shopping trip.
At the end of the day, we really just need to surrender to the fact that Amazon will eventually take over the world. And you know what – I’m just lazy enough to be okay with that.
Side note – while that was all happening – Wal-Mart bought Bonobos… which really annoys me. I’ll rant about that later.
“Deep thoughts” is the rambling, free flow brain dump of Anthony Pizzuto – the most interesting guy you’ll know. If you don’t get it, just shoot him a line: firstname.lastname@example.org
Image stolen (lovingly) from:
Whole Foods: http://www.wholefoodsmarket.com/stores/southlakeunion