My short take on Amazon buying Whole Foods

An Occam’s razor theory on why we are witnessing just a start of sector consolidation, driven first and foremost by cheap debt.

Money has never been so accessible

While Forbes reported Amazon has been scarcely visible on the debt markets with its last debt issuance completed in December 2014, it has still negotiated a debt facility with GS and BAML. Seeing how USD 4 trillion worth of liquidity appeared on the market after the Great Recession, it is not hard to see a return of long-term gamble sponsored by arbitrage seeking institutionals, supporting bold bets along the isle.

Not that the conditions challenge the impetus, with everything in terms of online and mobile consumption (where Amazon has been one of the pioneers), data processing costs (again, Amazon), assisted services (yup, AMZN) pushing the traditional platforms to either adopt the digital way or be swayed by it. Enabling the digital platform effect is hard — groceries being un untapped market for digital with digital being a distant relative for groceries — a positive match may have been found for both parties.

Many would remember the activist investor pulling the trigger.

Consent from WF was granted after the management has been cajoled by an activist investor, again seeking synergy effect and promoting a more active approach towards leveraging the competences or at least a promise of those to scale though the digital realm — or offering itself as a decent physical world platform for an efficient logistics operator and data analytics platform born out of a noble desire to sell books.

Is it something to do with the revenues repatriation that motivates the giants to play the long-term debt game?

In part, an increased activity to both fund M&A and support shareholder-value strategies is due to cheap money markets where corporates find more reason to participate directly (hence the dalliance with the blockchain investment) and the looming challenge of repatriating revenues from overseas as most of the industry tech giants park their cars in the shade.

We can be certain other alliances between the physical realm and the digital one are in the making as a number of concepts have merged or fused together:

• Online offline for transportation (taxi, car, freight, logistics, plane hire)
• Personal services curation (clothers, looks, hairstyles, beard-shapes)
• Household and property management (on-demand insurance, cleaning services, home delivery)

All that is supported by the invisible payment rail (in-app payment with one click or voice initiation, contextualising the asset (choosing) with the action (paying) — all of that built on top of a robust telco network using scalable cloud infrastructure — that is in turn fueled by — cheap debt.