How Amazon’s Acquisition of Whole Foods Will Hurt Small Business
2017 is shaping up to be a year of acquisitions. We started with PetSmart buying Chewy (a money hemorrhaging business) for a ridiculous $3.6 billion valuation. Next up was Phillips’ acquisition of PetFlow. This was an unsettling deal because it puts the pet industry’s largest distributor in direct competition with the independent retailers they’re supplying. Last but not least, we have the purchase of Whole Foods by Amazon last Friday. While Whole Foods is not a big player in the pet industry they’re still someone to watch.
Amazon has been one of, if not the most, prominent issue for independent retailers all over the world (more here). While their marketplace has been a boost for some product manufacturers we’ve also seen the proliferation of third party sellers breaking manufacturer agreements in order to push sales. At the end of the day we see Amazon and it’s growing host of sellers as a big problem for both independent retailers and manufacturers. That’s why the surprise acquisition of Whole Foods is of concern.
We’re starting to get an idea of Amazon’s ideal brick and mortar experience. Their soul sucking bookstores are being peppered throughout the U.S. and Amazon Go (their in-house developed grocery experience) is overly dependent on disconcerting big brother-esq technology. Independent retailers and manufacturers should be concerned. On the retailer end you have the introduction of an old competitor via a new medium. On the manufacturer end you have the standardization of product location, display, and branding. It seems Amazon has no interest in the products or brands people want. They’re much more interested in matching people with the products they want to sell them.
For consumers, it’s important to think about access points to the products and services they buy. After all, Amazon has. For years they’ve been working to funnel consumers into their one centralized buying process. While their strategy has been largely successful ($466 billion successful), they still had two missing pieces. They needed a brick and mortar presence and they needed an entry point into the $800 billion U.S. grocery industry. Now with the Whole Foods acquisition they’ve got both. They’re already gearing up to cut costs and change inventory all while increasing their Amazon branded store footprint.
More than ever the independent retailer and product manufacturer community needs to work together. Independent retailers need to understand that they’re not competing with each other; that’s small potatoes.They’re in a drawn out battle with Amazon whether they like it or not. This is not an impossible task, the majority of US businesses are small business. While Amazon might seem impossible to compete with, it’s not true. At the same time product manufacturers need to enforce pricing rules and work with the independent retail community to provide more competitive prices and product exclusivity.
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