Friday, June 16, 2017

Amazon shops at, no, FOR Whole Foods!

Amazon has taken control of Whole Foods, a publicly traded company. Amazon's offering a 27% premium on shares -- $42 per share, for a total of nearly $14B -- making this a big deal in both senses of the word. In fact, the biggest deal in recent memory, in the grocery business.

Whole Foods has struggled for years with its "Whole Paycheck" reputation, and in almost any discussion of what Whole Foods could or should do to revitalize itself post-Recession-of-'08, Trader Joe's has been the elephant in the room.

Basically, every one of those conversations revolved around, "What can Whole Foods do to be more like Trader Joe's?" Whole Foods sharpened pricing on their in-house branded products, and experimented with some smaller stores.

But now, the question is, what can Amazon do that Whole Foods couldn't have done on their own?

Analysts are saying that the Amazon deal will enable Whole Foods to lower prices, but so far I've read no explanation of how that will happen. It's easy to imagine Amazon pushing the whole grocery business into the online realm. So far, U.S. consumers have been slow to shop for groceries online. I haven't been tracking reported online sales, but a quick check suggests that a large majority of food purchases are still made in person, and carried home by the shopper.

This is one online market in which the U.S. lags. I've seen statistics that claim nearly half of U.K. grocery shoppers have at least experimented with online purchasers, and that over 10% of U.K. grocery shoppers buy all of their groceries online. I believe that; my sister lives in London, and does virtually all her grocery shopping online.

If I had to guess, I think Amazon feels it can achieve that kind of market penetration here too.

About 15 years ago, Jeff Bezos said,
I don't know about you, but most of my exchanges with cashiers are not that meaningful... "Have a nice day"... "You're welcome"... "No, we don't take credit cards." I mean, I love browsing around independent bookstores. But even there, the store doesn't instantly customise itself to suit your interests the way ours does and no one can tell you what other people who buy the books you're buying also bought. And you can't read your neighbours' reviews the way we allow you to. Those kind of community features can only be done online. And you can't have universal selection in a store, however big it is.'

Trader Joe's has built its brand on the strength of millions of direct, personal encounters between its famously cheerful and helpful staff and its zealous customers -- many of whom do feel that those interactions are meaningful. That's almost directly opposed to the appeals of online shopping. But crowded stores and famously congested parking lots are also part of the TJ's brand.

So it remains to be seen how much Trader Joe's business would suffer if Amazon made shopping online for Whole Foods groceries a real 'thing'. And, of course, this begs the question of whether the usually-slow-to-try-out-new-technology executives at TJ's will try to build an online shopping forum of their own.

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