Alexa, get me a gluten free carrot.

June 20, 2017

Author: Allan Kaganov

The Curious Cynic’s Guide to Amazon’s Whole Foods Acquisition

When Amazon announced its intention to purchase Whole Foods for $13.7 Billion, the internet collectively lost its breath. And, then the questions poured in. What do we do with all of those articles heralding the death of brick and mortar retail? What does this mean for [insert your industry here]? What’s going to happen to disposable income everywhere, and where will young professionals get their gluten free carrots?

In a retail climate where brick and mortar retailers are painfully clawing their way into ecommerce (only to close up shop months later), Amazon just turned the tables and made everyone re-think the in store experience. And, the speculations around Amazon’s game plan are more entertaining than HBO’s current line-up (Silicon Valley notwithstanding).

We’ve gathered some of the speculations and trends around the acquisition news to add our two cents.

Amazon is Breaking the Ecommerce Box

The truth is, Amazon is not the first e-tailer to take the plunge with real estate. Many startups have led the way.

In 2013, Warby Parker, an online eyewear retailer opened shop in Soho, across the street from the Apple store. On opening, founder Neil Blumenthal said “This is the convergence of e-commerce and bricks and mortar. The idea that it’s one or the other is ridiculous,” he says. “E-commerce as a term will become obsolete in five or six years.”

In 2015, BaubleBar, a “big-data-driven” jewelry startup opened its physical doors on Long Island. Co-founder Amy Jain explained, “We want to be wherever our girl is, whenever she wants to buy the product.”

In 2016, Bonobos, the largest internet-born menswear brand opened its first “Guideshop.” Guideshops operate as showrooms (fully stocked with cold beer), allowing customers to try the product before placing an online order with a guide. Founder, Andy Dunn said of its online origins, “I really thought stores were going away at that time.” He adds, “If you had 100 guideshops and 10 with stock that have the ability to be fulfillment centers to fill that same-day need? That kind of fascinates me."

In 2016 MonPurse, personalized leather goods company famous for its 3D design experience opened its first "Mon Gallery" in Sydney. Founder Lana Hopkins said "Bricks and mortar aren't dead. It was never dead. What it comes down to is: We need to make the experience super, super special for people. We need to remember that those people are us. We want something. We want more."

These startups obviously differ from Amazon in reach, supply chain leverage, market share, the list goes on. But, they saw the writing on the wall and got physical back when Amazon was only dipping a pinky toe in retail.

Amazon is Getting into the Grocery Game

If we’ve learned anything about Amazon over years, it’s that things aren’t always what they seem. It’s also that everything is a data-driven experiment.

If CREC’s Retail Division VP, Rafael Romero, is onto something, it’s not just about groceries. “I don’t think that this will be the last of Amazon’s purchases,” said Rafael Romero, vice president of Florida-based real estate firm CREC's retail division.  “They fully recognize that brick and mortar and online retailing is all retailing and you need both."

Many have recalled Amazon’s recent launch of Amazon Go, a checkout-free shopping experience that was piloted in Seattle last year. And, it wouldn’t be a stretch to imagine that Amazon just purchased 451 more locations to accelerate that program’s growth. But, if you’re thinking that this stops with milk and bread, you’re thinking small. While Wal-mart is busy buying its way into in the ecommerce game, imagine walking into an “Amazon Mart” on your friendly neighborhood corner and walking out after a “One-Click Checkout” experience.

Let’s not forget that Amazon just acquired a company full of retail minds in addition to a portfolio of retail locations. I wouldn’t underestimate what Amazon can do with that type of intellectual capital on its side.

Amazon Just Scooped Up High-end Distribution Locations

In most geographies, Amazon already offers same-day delivery. Through Prime Now, certain zip codes get groceries and other basic household goods delivered within two hours. Buying super classy grocery stores to use as distribution locations seems like wasted potential.

However, think about the lesson we learned from some of those startups. Bonobos has opened more than 30 stores, but they don’t actually stock inventory. That type of omnichannel experience seems unlikely in the Whole Foods scenario, but you can be sure that the omnichannel concept is being thrown around on a lot of Seattle-based conference calls these days.

Amazon in Taking Over the World

It seems that way. Amazon has one thing that big retail has been vying for, that is access to your phone. They didn’t even have to beg, plead, or launch a “loyalty program” to get it. That access likely makes them the most connected retailer in the world. It also gives them a huge opportunity to play with the integration of marketing and payments technologies with their in-store experience – a scenario that many retailers have been struggling to realize.

This is where many in our space are aiming their attention – the potential new standard of retail payments. What happens when your bank, your card issuer (oh, but the “card” is your phone), your retailer, and your logistics provider all wear the same logo?

The New Normal

Big news like this always stirs up the waters, but we’re in agreeance that this is largely unchartered territory. It tickles our ears because it’s amazing fodder for our imaginations, and for our dreams of the tech-enabled future. When the dust settles, you can guarantee that we’ll all be pulling out the organic, fair-trade popcorn as we watch the story unfold.

P.S. – Whole Foods CEO John Mackey did give a sneak peek into the big changes that are in store: “Things that I cannot talk about today and won’t be able to talk about until this deal closes.” Thanks for that, John.


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