So you read the previous article of Amazon’s acquisition of Whole Foods. More to quench your business and technology appetite (don’t worry, no calories).
Amazon’s one Achilles Heel (yes, they have one). Delivering fresh and perishable food is a much different operational activity commodity than delivering a book or pair of shoes. However, their acquisition of Whole Foods probably destroyed this challenge. Let’s explore how.
Now, some important details on the market and geo-demographics …
- Amazon’s 50M Prime members are a “captive list” of customers to promote its new brick-and-mortar subsidiary. Maybe for affinity rewards or member pricing.
- According to Phil Lempert, about 90% of Amazon Prime members live within ten miles of a Whole Foods store. (re-read bullet #1 haha)
- Approximately 40M households are within five miles of a Whole Foods store.
If given the opportunity and approval (from government agencies), could Whole Foods locations act as the hub for drone delivery for Amazon Fresh members?
If those facts are accurate, a powerful strategic weapon could be unleashed by this acquisition. Think about it … this strategy could increase subscriptions of Amazon Fresh!
Does the Whole Foods acquisition have anything in common with their mall pop-up stores. Does it sound like the reverse of the Amazon’s negative effect on Best Buy several years ago? Best Buy became consumers’ “Best Showcase” for electronic products. To only have consumers purchase those same products from Amazon directly.
Is there some irony here? Wonder if the high cost of mall retail space and labor will return their revenue goals? Will the ability for consumers to “touch and feel” a product generate additional sales traffic? Are shopping malls becoming less popular?
Lowering the barriers by personally experiencing a product by trial is a great way to initiate a product adoption cycle.
Is this the underlying strategy for the acquisition?
Consider Amazon Go. Unveiled in late-2016 and then delayed the opening in 2017. Did the technology model associated with Amazon Go fail? Did process or operational issues occur? Without any corporate statements or press releases, it is impossible to read between the lines where the checkout lines (forgive the pun) did not exist.
Supplier management. Imagine the increased power (if that’s possible) over suppliers now with the acquisition of Whole Foods. Reduction of the product costs for items stocked in the stores with suppliers that Amazon already does business with? Increased profits. And the additional pressure on suppliers with the coordination of their online and brick-and-mortar product lines.
Ready for another consideration? Imagine two points:
- The vast amount of data generated by Amazon. Clicks, sales, navigation, recommendations, etc.
- The point-of-sale data that is gathered by Whole Foods at each of their retail stores.
Combine and integrate all of this data … by UPC, channel (retail vs. online), location (store) and membership number … with Amazon’s vast experience with data analytics.
The Whole Foods acquisition is clearly a game changer. So what does this all mean?.
- Is the explanation of the Whole Foods acquisition for Amazon to quickly “buy their way” into the grocery brick and mortar world?
- Or … Will they integrate this acquisition into their Amazon Prime? Amazon Fresh?
- Or … Abandon opening their own grocery stores? Soon to become Amazon Whole Foods?
- Or … Have they resolved the technology and operational issues associated with the Amazon Go stores and integrate that technology into Amazon Whole Foods?
- Or … (drum roll) maybe the answer to this complex multiple choice question … All of the above?!
Right now, do you feel like you are watching a ballet … a well-planned and choreographed (dance version of a business strategy) set of dance moves (individual tactics) to build a flawless performance (business success, revenue, profit).
The executives of the … national retail chains (Wal-Mart, Target), the warehouse store chains (Costco, Sam’s) as well as all of the regional grocery chains … are now huddling asking for an analysis ASAP.
These organizations should be providing an analysis to answer “How does this acquisition affect …
- The grocery industry?
- The branding of their organization?
- The various organizational components of their operations including technology, pricing, logistics and delivery.
- Amazon’s next strategic moves? That’s a five-course dinner!
Amazon’s acquisition of Whole Foods Market will change the landscape of grocery retailing. It looks like a game of poker. Amazon just raised the bet!