Stocks of supermarket companies took a dive last week on news that the great category-killer, Amazon, is acquiring Whole Foods Market. In a $13.7 billion deal, the online retailer sent a ripple through an industry already challenged by thin margins and excess capacity. More than its tangible impact, the announcement added urgency in the race to bring the same disruptive forces to the grocery business that have roiled traditional retailing.
Amazon was already dabbling in food sales. AmazonFresh, the company’s online offering, has been reviving a concept originally rolled out 20 years ago by internet grocer Webvan, which was the biggest tech IPO in history at the time before it flamed out. Amazon is clearly better positioned to succeed and avoid many of Webvan’s mistakes.
The online retailer of everything also has been dabbling in the bricks- and-mortar-side of the business. It is currently beta-testing AmazonGo, a physical store that uses sophisticated technology and a phone app to allow shoppers to bypass the checkout line. While not ready for prime time, the concept is appealing and innovative, and no doubt will make a wider debut as the bugs are worked out.
Christopher HopkinsTruth be told, Amazon has concentrated on a fairly narrow slice of the grocery market willing to pay more for a relatively specialized product. Peruse the AmazonFresh webpage and you will find “single cow” hamburger meat for $10 per pound that traces its pedigree to a 19th century Scottish Angus bull by the name of “Old Jock.”
Not exactly the stuff of mass markets, but it makes perfect sense if you are rolling out a new concept to early adopters. This makes upmarket and narrowly-focused Whole Foods a good fit and gives Amazon a developed distribution network closer to the end customer.