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Amazon Buys Whole Foods, Moves Closer To ‘Everything Store’

By Scott Costa, Publisher, tED magazine

After months of speculation and general guess-work, Amazon surprised a lot of people on June 16 when it announced it was buying Whole Foods for $13.7 billion. Whole Foods will not change its name, but it will adopt some of the Amazon technology and customer focus as it moves forward.

Reaction was quick and a little more than just slightly alarmist.

Robert Reich, the former Labor Secretary turned social media commentator, summed up the transaction by writing, “Heads up: At the rate they're going, within 20 years Amazon, Google, and Apple (possibly along with Microsoft and Facebook) will dominate the American economy. Watch as they begin to take over finance and the media.” Reich also wondered if it was going to take government intervention, by way of possible anti-trust action, to slow down the progression of Amazon and the others.

But that also got me thinking about an email an NAED co-worker sent me just a few days before the Whole Foods announcement. It was a quote from Alberto Brea, the Executive Director of Engagement Planning at OgilvyOne Worldwide.

“Amazon did not kill retail, it did it to itself with bad customer service.”

That got me thinking about how my wife shops for clothes. When she goes to a shopping mall store, she can pick from what is on the rack. And that's pretty much it. She can go online, but it's pretty much all the same stuff as what she sees on the rack. And if she wants something in a certain color and it's not available, she's out of luck. So, she goes to this person who owns a boutique inside her home. I'll be honest, the whole thing seems strange to me, but so did buying clothes on the Internet just a few years ago. At the boutique, she gets the cut, color, size and style ordered specifically for her. When she finds something she likes, the boutique owner orders more items that are similar so she can check them out, too. My wife loves it, and she hasn't bought an item of clothing anywhere else in about a year.

What does her shopping experience have to do with Amazon? Remember back to the National Association of Wholesaler-Distributor's Executive Conference last February. Amazon Business Director and General Manager Rob Green was a keynote speaker, where he not only reported on the success of the B2B arm of Amazon, he proudly displayed the Amazon Business slogan. “Everything you love about Amazon. For your business.” The innovative way my wife shops for clothes will one day be the innovative way your customers will shop for electrical products. Amazon is ready to meet their customers half way.

Think about what Amazon has already done in the grocery industry. Amazon Go, a brick and mortar grocery store, is already open in Seattle (watch the video below to see how it works). Customers scan their phone's Amazon Go app when they walk in the store, and, using technology, everything they put in their bag is scanned. Then they walk out. No checkout lines and no waiting. Your Amazon account is automatically billed for your purchases. There are plans to expand Amazon Go, and Whole Foods may be the place to do it. Meanwhile, the biggest innovation at my local grocery store in the past five years is sanitary wipes for my shopping cart.

Chase Purdy, a writer for Quartz Media, probably said it best in this column after the Whole Foods sale was announced. “It's a sucker punch by Amazon in a herculean fight over the future of shopping, a bid to bring more US consumers into the company's orbit, and in doing so invite them to rely more on the internet than their cars when purchasing household goods.”

The grocery industry has taken notice. It's a nearly $1 trillion a year industry, and Whole Foods only has a little more than 1% of it. If Amazon's technology can take hold, there is a strong possibility Amazon will make back that $13.7 billion purchase price very quickly. “There is a lot of change in the food retail industry, both in terms of the operating environment and the competitive landscape,” he said. “We know there is a lot of upheaval in the food retail industry,” Kroger CEO Rodney Mullen said after the sale.

Amazon Business will also continue to look at upheaval in the B2B distribution landscape. Green said last February that Amazon already has three pillars in its stable of products: Amazon Marketplace, Amazon Prime, and Amazon Web Services. It was searching for a fourth, and may have found it in the grocery industry. But, especially now that it continues to use technology in it's customer-centric approach, we should expect Green to continue to push Amazon Business toward a “pillar” location. With growth in India, Germany, and England, Amazon Business is still positioned for expansion.

I wrote previously that Amazon is looking for that fourth pillar to its already successful stable of products: Prime, Web Services, Marketplace. Rob Green, General Manager of Amazon Business believed the B2B market would be the fourth. I think they just found it. But with expansion into India, Germany, and the U.K., Amazon Business is still on track to be the fifth pillar.

Brea adds, “Technology by itself is not the real disruptor. Being non-customer centric is the biggest threat to any business.” And that is partially true. But the use of technology in an area where customers want it most, or, more importantly, where they don't even know it exists but will improve their lives, will create a lot of competition not just in the B2C space, but B2B also. And Amazon CEO Jeff Bezos is ready to show off that technology to a whole new audience across the country. “Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” Jeff Bezos said in a statement just after the purchase. “They're doing an amazing job and we want that to continue.”

Remember, Jeff Stone wrote “The Everything Store: Jeff Bezos and the Age of Amazon” about how the goal is to one day have everyone buy everything from the online giant. With the purchase of Whole Foods, millions more people will be exposed to the technology and customer-centric approach of Amazon. “Everything you love about Amazon. For your business” just grew even bigger.

 

 

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