I highly recommend you take a moment today and read Scott Galloway’s take on Amazon acquiring Whole Foods Market. I’ve been very surprised by how little chatter the acquisition has earned in this week’s news cycle. Amazon is poised to completely disrupt (god I hate that word) how people get their groceries in a very short amount of time.
Amazon / Whole Foods will be the fourth-largest grocer in the US, and will likely post growth rates no $10B+ retailer, sans Amazon, has registered. The Seattle firm will apply its operational chops and lower (zero) profit hurdle to the Whole Foods business model and bring prices (way) down. If you wish you could shop at Whole Foods more often, but it’s too expensive, your prayers have been answered. Whole Foods will become the grocery equivalent of a Mercedes for the price of a Toyota. Grocery has stuck their chin out (little innovation), and the entire sector is about to have its jaw shattered.
Amazon’s poised to expand into the grocery market swiftly:
Amazon has warehouses within 20 miles of 45% of the US population. It will soon have an additional 446 warehouses, including in 32 states where Amazon has not yet established a grocery presence. However, these are warehouses (Whole Foods stores) that also make money.
The reach expands beyond groceries:
Amazon Media Group will now be able to sell online and offline media. The $1.6B division, overlooked by most analysts despite being 4x the size of Snapchat, will become the fastest-growing, most profitable media business in the world and begin eating into Google and Facebook’s dominance. In addition, they won’t even pretend to work with agencies, in contrast to Facebook and Google, who pet agencies on Cannes’ beaches as they slowly euthanize them.
My only point of contention with the article is his take on tech hardware:
Amazon will displace Apple as the top tech hardware innovator, with Alexa cementing itself as the gadget that defines the decade (post iPhone). Grocery / commerce via Alexa will create the utility that Alexa needs to [maintain its lead] over Google and Apple’s home / voice offerings as they try to play catch-up.
Amazon has proven time and time again that they just aren’t great at hardware when it comes to tablets and phones. Alexa enabled smart speakers are cool, but smart speakers aren’t the future. Phones aren’t either, but smartphones will not be replaced by a speaker, something else entirely will do that. Amazon’s most interesting piece of hardware currently might be the largely overlooked Dash Wand which I predict will become more well known as their grocery service expands, but that has nothing to do with Apple’s bottom line.
If I were a grocery chain CEO I’d be very concerned. Combine Amazon’s acquisition of Whole Foods with their existing distribution network and sprinkle on 5-10 years of automation and driver-less transportation and the market isn’t looking to hot for traditional grocery stores.