“Alexa, What shall we do next?”… “Takeover the World Mr Bezos”
Business News has been dominated this week by the announcement by Amazon of their takeover of brick-and-mortar retailed Whole Foods
It is quite remarkable that such an acquisition, Amazon, the brick-and-mortar retailer destroyer buying a brick-and-mortar retailer, received such backing from analysts
Amazon’s Share Price initial decline was short-lived with an increase over the 2 days settling towards the 30 basis point mark
So where is the value in this deal?
The acquisition of Whole Foods positions Amazon in one of the many areas that Bezos has spoken about for some time. Surprisingly not physical stores either. But grocery
Amazon have delved into the grocery market with their collaborations with supermarkets. Whole Foods in the US. Morrisons in the UK (subject to location). All giving amazon flexible access to their goods through the Amazon Prime service
A business model in itself that is evidently quite limiting. How much margin were Whole Foods and Morrisons gaining in this partnership? How much premium were Amazon required to pay for flexible access to their products? From an operational perspective, were logistics matched to the standards Amazon expect?
Whilst Amazon almost certainly had the better end of any deal given their scaling capabilities and customer base, the reality is that Amazon would have been better without these as partners
So where next for Amazon?
There may be expectations that Amazon’s online grocery operations will be bolstered by the acquisition. Quite the opposite will happen. Much beyond grocery too
- Amazon will begin to leverage the ‘paymentless store’ technology which has appeared through Amazon labs. They now have the physical presence
- Click-and-collect capabilities have the potential to go from strength to strength. Forget about the premiums Amazon pay for hosting locker services
- Amazon Sellers potential may gain a ‘premium’ service for an in-store presence. Consider how the supermarkets are able to charge brands for shelf-space
- Drone delivery even now has an extensive potential number of localised bases to launch from
Fundamentally, the acquisition has offered Amazon a platform to launch a series of its pipeline innovation from. All at a localised level
What does this mean for rival retailers?
Many will say that this could be the end for some retailers. Frankly, it is difficult to disagree. Amazon’s online scale coupled with a brick-and-mortar presence offers a competitive front which will be completely unmatched
Retailers who are tinkering on the edge of existence are at a major risk by this acquisition. Depending what Amazon decide to do
As the topic title suggests, Amazon and Mr Bezos must make some incredibly tough decisions over this coming year
Although my opinion is that Mr Bezos knows exactly what his World domination plans are!