Thursday, July 27, 2017

Amazon Buys Whole Foods ... Why?

$13.7 billion buys a lot of organic free-range semi-seasoned fair-trade fresh-squeezed coffee beans

Image Credit TechCrunch
I honestly don’t know anything at all about the grocery business. If none of my thinking here makes sense, please leave comments and help me to learn. But having watched Amazon for many years as they go from simple online book seller to purveyor of all things, to behemoth back-end web-services provider, I’m not sure that Amazon simply wants to be in the supermarket business. Of course, they might be, so I’ll list that first in my list of possible reasons why Amazon is willing to spend $13.7 billion on Whole Foods.

Which of these rings most true to you? Amazon will...
  1. seriously enter the traditional supermarket business
  2. use the Whole Foods locations as retail store fronts for Amazon products
  3. leverage Whole Foods’ supply chain and locations to super-charge their own Amazon Fresh delivery business
  4. operate Whole Foods and significantly drop prices in order to start a supermarket price war. Weaken at least some of the competition and push others out, after which Amazon Fresh and traditional Amazon dry goods grocery items can gain market share
  5. do something I haven’t thought of yet
I find #4 to be the most interesting.

Amazon seems particularly focused on Walmart and Target (big retailers who also sell groceries) and would love to deal them a serious blow. If along the way Amazon can damage some of the big supermarket chains while simultaneously boosting their own multi-faceted food business (Amazon Fresh, traditional Amazon food sales, and the rumored Amazon competitor to Blue Apron), that would be a very savvy business move.

Does this sound improbable to you? Not to me. Just think back on Amazon’s history and the way they have aggressively moved into other business areas (AWS), acquired great businesses (Zappos), and destroyed businesses they perceived to be in their way ( I think anything is possible.

What do you think?