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June 19, 2017

Amazon Consumes Whole Foods Whole

Filed under: Main — admin @ 12:01 am

The Internet joke goes that Amazon CEO Jeff Bezos asked his Amazon Home device, “Hey, Alexa! Buy me something from Whole Foods.” And Alexa replied, “Buying Whole Foods.”

This past week, online retailer Amazon purchased brick-and-mortar pretentious grocery store chain Whole Foods for $13,700,000,000 dollars.

To underline the seriousness with which the food industry took the move, most grocery store stocks plunged the day of the announcement.

Many of my friends label the move as predatory. Amazon is often blamed for the decline in bookstores. That was their first business, selling online books. They had an edge up on most bookstores because Amazon could (and did) stock millions of titles whereas your neighborhood Barnes & Nobels or Borders stocked only a few thousand books. And today, few bookstores remain.

Then Amazon kept adding more and more items to its inventory. It invited other retailers and small businesses to sell under its umbrella. That’s where Amazon became rather aggressive with its pricing policies, which thinned the margins of a lot of small businesses. Worse: People shop at a local store, then (sometimes even while still in the store) use their phones to buy the same product on Amazon.

Like Walmart before it, Amazon became the industry ogre, setting prices and policies for businesses other than its own. I hear cries of “monopoly” from various sources, but Amazon isn’t a monopoly, not like AT&T or Standard Oil. It’s an ogre, but Amazon isn’t a monopoly.

Recently, an attack (or bug – who knows?) of the Amazon online services proved how vulnerable the company can be. Give the world three days of Internet downtime and Amazon is a wounded beast. Still, for the meanwhile, it’s consumption of Whole Foods poses interesting puzzles to ponder.

Grocery stores are one of the few places where online sales don’t dominate. People like to thump melons and pop a grape before buying. Sure, the dry goods and such could be purchased online, but that model has been tried many places and failed time and again. Can Amazon pull it off? Will people be okay with “fresh” 2-day delivery on a hot UPS truck?

Not to mention: Whole Foods isn’t everywhere. My hometown doesn’t have one and the neighboring big city doesn’t have a Whole Foods store. The closest Whole Foods is over 400 miles away. Further, I’ve been to Whole Foods and wasn’t really that impressed. Things seemed overpriced and not much better beyond what I can find at the local organic foodstore.

No one knows how this acquisition will unfold. My opinion is that Bezos has been lucky and Amazon’s predatory practices have resulted in billions for him and his company. If he has the smarts to figure out grocery delivery, then good for him. But, no it won’t be a monopoly.

3 Comments

  1. From Slate:

    Amazon is enormous, and it is apparently rapacious and remorseless. But at least superficially, it has done nothing in its 20-year life but sell things more cheaply and innovatively than its competitors.

    Comment by admin — June 19, 2017 @ 10:04 am

  2. The danger that ““Hey, Alexa! Buy me something from Whole Foods.” And Alexa replied, “Buying Whole Foods.”” is the main reason I don’t like very smart tech…

    Comment by glennp — June 20, 2017 @ 7:38 am

  3. I don’t see the attraction to those gizmos. They recognize anyone’s voice, so when I had the chance to interact with one, I started playing random music, ordering several tons of broccoli on Amazon, and other mischief. The whole time, Amazon is spying on you, recording conversation, looking for keyphrases. It’s creepy.

    Comment by admin — June 20, 2017 @ 7:43 am

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