AMAZON’S MOVE ON WHOLE FOODS IS PRIMAL, MORE THAN “DISRUPTIVE”
The Amazon takeover of Whole Foods makes me feel really old.
It’s not like I grew up before there were cars, computers or mail order. But I do remember when politicians and media pundits used to have an automatic question whenever there was a corporate takeover — is it in the public interest?*
I know I date myself terribly, but I miss that kind of question, especially when it relates to something with as outsize an impact as food and beverage retail— which accounts for $5.3 trillion in yearly in sales in the US alone.
True believers in high tech disruption are having a heyday trumpeting out forecasts based on the positive and inevitable transformation to be caused by a takeover of a modestly-sized food retailer, Whole Foods, by Amazon, which a short time ago had a 0.8 per cent penetration of the $800 billion US grocery market, and even less in Canada and the UK.
I believe the most important lens to apply to this corporate takeover is an eco-food lens, not a high tech/digital disruption lens.
The Bezosification of food will have a long tail, and it will mostly be bad for all important things food-related.
Not just bad for farmers, workers and the same old/same old bricks and mortar crowd we’re used to seeing left to eat the disruption dust. This will be bad for health, the environment and cities — and even more important, for the fundamentals of food as a major definer of the human experience.
So let’s look at Bezosification not as a retail disruption story, but as a food story — one which accelerates the decline of people-centered food systems, not just traditional bricks and mortar retailers.
DOWN ON THE FARM
Problems faced by farmers, admittedly a tiny group in the population in the Global North, should not be pushed to the side in assessments of this takeover.
Farmers, together with fishers, are the people who feed us. Farmers in countries that will be most impacted by Bezosification are well into their 50s, because neither their kids nor any other grouping see a way of making a viable career or life out of working the land. This is the problem staring anyone concerned with overall food security in the face.
If the digital transformation cheerleaders will acknowledge for a moment that food is a very long way from being digitalized, and that the human gut is some distance from converting digital units into nutrients, we can recognize that people who eat food will long need those who apply algorithm-free human skills and savvy to working the land and waterways.
A deal that is bad for farmers and farming deserves to be seen as a deal that starts off by violating the public interest and human needs. Perhaps worth a pause for reflection before going headlong down a path of disruption?
The historic reason why farming has such a hard time renewing its workforce is that the income is too low and the stress too high from coping with a situation where individual farmers buy everything retail (at no discount) from a handful of mega-corporations, and then sell everything wholesale (at big discounts) to a handful of corporations.
The turning point in how the squeeze on farmers got more intense came during the 1960s and ’70s, when supermarkets became major retailers of food, and when supermarkets came to be a highly concentrated and transformative force within the food sector. This trend has been documented by scholars such as Tony Winson — whose book is available from Amazon, the first name to pop up when you google Winson’s book title; it is now on sale for one cent + shipping, a price point farmers and food suppliers will want to mull over.
The trend of mega-corporations taking over the inputs and outputs of food production (to use econo-speak, and a study referred to here) has intensified during the last two decades, the period since Winson released his book.
The Amazon takeover of Whole Foods is a blip in that overall pattern of monopolization — with all due recognition of Amazon’s power, it is only a blip in the overall picture quickly summarized in this report. But an important blip, because it ramps up the speed by which tools will be adopted to intensify the impacts of monopolization — particularly the impact of squeezing farmers one more time to lower their prices below their costs of production and to devote their production to outsized wholesalers.
To the extent Bezosification makes the food retails sector more efficient and more responsive to customers, it will become more efficient at demanding more from and paying less to food producers.
This will happen in two ways.
One is the ever-deepening push toward private labels, which Amazon is exceptionally well-groomed to take full advantage of, moreso even than Walmart.
Processed foods is where supermarkets have always shone. Processed foods always provided the major point of differentiation and competitive advantage supermarkets had over independent grocers and farmers markets, both of which are both stuck selling actual foods the shopper must prepare from scratch — as an astute article has recently pointed out.
The supermarket middle aisles, where these once-foods are sold, is where Big Retail makes Big Money, because the retailer runs off with the revenue that once went to the brand value, savvy and connections built up by processors, and turns processors into low-cost commodity producers. In turn, the bargain-rate processors outsource their ingredient orders to whatever producer is desperate enough to sell at bargain basement rates.
Secondly, Bezosification adds another powerful player who demands full payment for the set of tasks that used to be managed in a more helter-skelter way.
To survive, Big Retail has to rush headlong into all the expenses of creating, nurturing and catering to customers who just want some dependable product delivered to them so they can cope with the rush of their lives.
These are expensive customers to create and cater to, and someone has to pay for it — and it isn’t going to be the customer, the supermarket or the processor. More money has to be taken out of the consumer food dollar to go to retailers who go to such lengths to cater to consumers, and that additional expense will be covered by the least powerful member of the food chain — the farmer.
DOWNER FOR FOOD WORKERS
This takeover will not make the food industry great again, at the very moment when its greatness is sorely needed.
As I have been arguing for a few decades (alas, most easily found at Amazon), the food sector, the world’s largest employer by a long shot, has the best chance to take up the kind of good jobs once provided in the heyday of heavy industry. Food is hardest to automate (due to the complexity of human interactions) and outsource (due to its bulk and perishability), and delivers so many health, environmental and social benefits that it should have every prospect of becoming a good industry to work in, as a central player in what might be called the job-rich foundational economy meeting basic human needs.
In a reasonable world, most jobs in the food sector would have an artisanal, professional or entrepreneurial quality. Growing and processing food properly (with a minimum of toxins, and a optimum of nutrient-retention and sustainability) requires extensive brain-hand coordination, which is the hallmark of artisanal occupations. Educating producers and consumers for the level of food literacy required of a knowledge-intensive and knowledge-worthy part of life requires many who owe their training to professional, as distinct from corporate, training. And the hundreds of thousands of local and independent companies needed to bring producers and consumers together in value-enhancing ways opens the floodgates for entrepreneurship.
That, at least, has been my vision.
The point about artisans, professionals and entrepreneurs is that they do not fit well with commercial algorithms that drive automated software applications. Knowledges and interactions required by these groups are too complexly human for that.
Amazon, already a giant employer, is heading in the opposite direction. Jobs are relatively poorly paid and treatment of employees is notoriously lacking in provision of or preparation for the humane and social skills essential in an overcrowded and challenge-laden world.
Anything that increases the power of Amazon reduces the power of working people to shape their own, or the world’s, future.
There used to be a time when government regulators didn’t like the idea of companies holding too much power in too many sectors, thereby gaining an unfair advantage of combining knowledge and connection from one sector and applying it to another.
Someone who knows the range of books I read has a huge advantage when it comes to selling me food and kitchen utensils, and then has a huge advantage in selling me entertainment “products,” and then travel “products,” and so on down the line.
That’s where the easy money is found, in the department store version of telecom-style bundling — using the connection from one product to move another product quickly and easily, almost by default.
That’s what Whole Foods couldn’t do, and ultimately why it dropped the ball; it was a purpose-built organization, as a fine portrait of Whole Foods CEO John Mackey and his approach during the last days of Whole Food reveals.
The demise of Whole Foods tells us that a purpose-built food company (one that promotes health and wellness as the purpose of the company) cannot withstand the demands of shareholders for increased profits. Such profits, enough to satisfy speculators, are rarely to be found in food because food is such a low-margin business. To seek higher margins and profits to satisfy such institutional investors, whom Mackey referred to as “greedy bastards,” food must be aligned as the entry point to a series of higher-profit transactions. That’s why Whole Food’s Mackey had to seek refuge in an Amazonian department store that sold products offering more and higher profits than a health-focussed food company could provide.
The demise of Whole Foods, in other words, expresses the truth that food retail is not a viable or sustainable business. Food is mainly viable as a loss leader to get people in the door, where they can be enticed to buy something else. It’s hard to make a more damning indictment of food industry viability in today’s food regime.
The “barrier to entry” to success in retailing food as the first rung in a ladder of non-food purchases becomes so high that access to new food retail opportunities by up-and-comers is squelched.
Reducing competition, and eliminating small and upstart competitors, is not a good way to make better food choices available to shoppers.
There are also privacy issues shoppers might well be concerned about. Supermarkets following up on your purchasing patterns already know as much about you as your therapist, but in letting your supermarket keep the information on your food shopping patterns, you aren’t necessarily aware that this information can be mined by many other retailers.
When retailers have such fine-grained information about shoppers’ unconscious, and know it so much better than shoppers do, it can not end well for shoppers. Unlike free markets where buyers and sellers have equal access to information needed for good decisions, the sellers have most of the information.
WASTE OF OPPORTUNITY
Home delivery of packaged goods is not good for the environment, especially at a time when seven billion people are eligible to have each purchase individually packed to withstand the punishment of delivery. It’s not bad enough my books now come smothered in cardboard, my detergents and foods will too?
It is distressing that in this era of global warming and unprecedented species extinction that high techers would show so little awareness of the fact that economies as well as people are embedded in the environment that provides all of us with the essentials of life — by which I mean air and water and food, not doodads, gadgets and books sent to my doorstep.
This is one of the most irresponsible packaging trends imaginable, and makes disposable coffee pods pale in comparison.
Ironically, the ultimate saving grace of digitalization is that it dramatically reduces resource usage and resource throughput by providing products as information, which travels light and without wrappers or against friction of time and space. But then Amazon takes this gift and turns it into its opposite.
This is disruption of lifecycles necessary to the life of 7+ billion people on a stressed and crowded planet — not disruption worthy of celebration.
(For essential background reading on the critical ecological context for evaluating any business endeavor, I cannot speak too highly of the book Donut Economics, and will soon write a longform article on its application to food.)
HEALTH AND ENTROPY
In my book on the evolution of the modern global food system, I track the rise of “agribusiness” during the 1950s, a true disruption in the relationship between humans and food. Instead of the fairly simple chain that went from farm to distributor to eater to compost, we had a long supply chain that defined itself as a business (thus agribusiness), not a culture (whence agriculture).
Anyone who understands the laws of entropy (energy degrades from concentrated and organized to diffuse and disorganized) should be able to automatically deduce that lengthening of the food supply chain degrades the energy (nutrients) of the food. More hands touch the product, increasing the likelihood of food-borne disease; more time passes during which volatile vitamins can dissipate; more heat and energy is applied that depletes more vitamins; and so on down the long road of nutritional entropy.
Knowledge of the laws governing life on the planet tells us that to increase the healthfulness of food, we need to move to shorten, not lengthen, the food supply chain.
That means a healthy food system will be based on prioritizing food grown at home or in the community (through urban agriculture for example) and food from a territorial (bio-regional) food system sold through farmers markets — both of which keep food, nutrients and jobs (themselves a cornerstone of social determinants of health) in the community.
Regard for the healthy food culture needed to support healthy food also leads away from Bezosification.
Rather than living in a virtual world of the head, we need to embed ourselves (as Donut Economics reminds us) in the real people-centered society we live in, and draw strength and nurturance from. That means we eat more slowly, more often enjoying meals with friends and family (about half the meals in North American are eaten in cars or at desks or in front of boob tubes) and expressing gratitude and grace for the world (donut) all this health and joy are embedded in.
The Amazon lifestyle is not supportive of such a food culture.
TWO ROADS DIVERGED IN A CITY
Retailers built on the Amazon model rip off and undermine cities. As a result, cities would be wise to take the lead in resisting any expansion of this model.
Cities need vibrant main streets to thrive. Main streets provide convenience and fitness opportunities by making it easy to walk to a local store to buy basic provisions, such as food, often on an as-needed basis day-by-day, which usually reduces food waste considerably. When shopping is done that way, packaging waste is minimal, as there is a reduced need for packaging to withstand long and tough travel. As well, over time, main street stores provide fellowship, as retailers and customers get to know each other — an unrecognized and undervalued form of social support, referred to in the sociology literature as “second ring of friendship,” which I explain here.
The Amazon model is designed to disrupt (bankrupt is a better word) local main street businesses, most of which pay a hefty portion of the property tax in most cities. Since their customers come by foot, public transit or light car, and their suppliers by mid-sized truck, mainstreet stores cause minimal road damage. By contrast, Amazon-style companies, which ship truckloads of packages from out-of-town warehouses, pay no local retail business taxes, even though their heavy trucks give local roads a heavy pounding (on city streets, 18-wheelers lift most of their freeway wheels, and all their weight hits the road through fewer wheels).
In Canadian cities, at least, the price of road damage is largely picked up for by city taxes, which main street retailers pay substantially to, but which Amazon and its likes don’t. Wherever they are, cities all carry the heavy costs of traffic jams (commonly in the range of billions of dollars a year), which are only made worse by direct warehouse-to-customer delivery.
Bezosification is not just another innovative and disruptive business practice. It externalizes business costs of a non-resident business onto the city. The Amazons of the world disrupt local businesses that pay for services provided free to the disruptor. Just a little externalized salt to rub into the disruptive wound.
If cities want to have vital and pedestrian-friendly main streets, they will find a way to prevent externalization of retail costs and allow main street businesses, the keystone species of healthy main streets, to compete on level playing fields.
For details on how this erosion of city vitality and finances goes down, there’s nothing better than Olivia LaVecchia and Stacy Mitchell takedown of Amazon’s Stranglehold. Pages 53 to 67 should be required reading for all city officials, advocates and politicians.
PART OF FOOD IS NOT FOR SALE
Love is not a commodity and anything that commercializes it debases it. Religion and spirituality are the same.
Health, education, culture and food are slightly different. They are human services that people provide for money, without defiling the service in the slightest — indeed, often enhancing it. But their purpose is not to make money or profit, but to meet human need and advance the public interest. If moneymaking becomes their purpose, they are degraded.
Widgets are another matter altogether. They fulfill a personal need. They have no mandate to serve the public interest. This is a world where the Amazons might do what they want, as long as they play by basic rules of fairness and social responsibility — no pollution, no child labor, and so on.
But the Amazons disrupt the very meaning of health, education, culture and food services by making them strictly commercial. They do not even make a pretence of being a purpose-built company in the way that Whole Food and other supermarkets did and do.
Amazon will sell anything someone wants to buy, and adds no knowledge about food or commitment to food into the bargain. It is strictly a commercial proposition.
While I (hopefully obviously) would oppose any effort to deny them business opportunities in any sector, I see no reason to let them be free-riders, as they are now — using public services without paying into them, polluting the environment without having to pay reparations, and so on.
There is no excuse whatsoever for Amazon being able to fund its takedown of independent retailers by siphoning $613 million in taxpayer-funded subsidies since 2005, as revealed by Amazon’s Stranglehold.
We need to protect food as meeting a fundamental set of human needs, including nourishment and companionship (which comes from the Latin roots of with and bread), built, managed and owned on a human scale that expresses sovereignty of the people.
Cities are starting to tax soda pop to pay for health services. If federal governments allow the takeover of Whole Foods by Amazon, which I would very much regret, I would urge local governments to ensure that Bezosification of the food sector operate on a fully self-recovery model, in which they pay in full for damages inflicted on the environment and health of local populations.
Nothing like insisting that businesses pay the real costs of the way they do business to throw a real disruptive curve to those who just want to externalize their true costs.
We always need to remember that food is unique in the way that relations between food and humans are open-ended and iterative. Food is a construct of humans, who identify food as a commodity that is useful to us, not its own properties or proclivities. But the things we call food are not so passive or predetermined in their patterns as we might imagine. That’s why food systems are referred to by academics as “complex adaptive systems,” rather than mechanical linear systems. (If anyone bugs me about this, I might even do a column on what that’s all about.)
The natural laws governing food are not as predictable or predetermined as those governing the rate at which stones fall because so many foods (livestock most obviously) have a mind or inclination or variability of their own. Humans can not act on food (again, livestock most obviously) as if food is inanimate. So the biggest and most powerful of capitalists cannot dictate to food as if it were an obedient employee, and cannot entirely have their way with food.
For their part, humans have relations with food that are wrapped up with memories and emotions in ways faintly echoing the ways Indigenous people speak of “all our relations.” The responsiveness to issues such as food waste and local food and foods people love and hate have few parallels among other purchases, save for cars, which some men project personality and gender to.
The disruptors have stepped into something of a minefield or quagmire, and we will see soon enough if food logistics are as easily disrupted as masters of commodities that can be virtualized expect.
*It turns out there is an explanation for this media and political silence on monopolies; it is available here — academically rigorous, but a treat for those who believe there are conspiracies in history, even if history is not a conspiracy.
(If you wonder who I am, please check out the brief bio at Wikipedia. If you wonder what I do in the food and city space, please sign up for my free newsletter, which I do with the great staff at Hypenotic, at http://wayneroberts.us12.list-manage.com/subscribe?u=ab7cd2414816e2a28f3b35792&id=1373397df7 )