If for some strange reason you were reading tech news this weekend, you likely ingested endless analysis of Amazon’s blockbuster announcement that it intends to acquire organic grocery chain Whole Foods Market Inc. The New York Times called it more evidence of Jeff Bezos’s prodigious tolerance for risk. Writing for VentureBeat, Fahim Naim, a former Amazon.com Inc. category manager, said Whole Foods stores could double as mini-fulfillment centers and hubs for Amazon Fresh. Consumer Reports said Amazon’s big opportunity is to use devices like the Echo and Dash Wand to make groceries easier to buy.
In the coming weeks, we’ll see whether the Trump administration, despite numerous job openings at the Justice Department and Federal Trade Commission, will decide to throw obstacles in Amazon’s way. We’ll also find out soon whether any competing bids emerge for Whole Foods.
That is certainly possible. New Walmart.com chief Marc Lore, in particular, has been deputized to make bold moves to defend Walmart’s status as the largest grocer in the world. “They’re Coming for You, Bezos,” we said on the cover of Bloomberg Businessweek just a few weeks ago. I don’t think it was a coincidence that Amazon unveiled its acquisition on the same day of Wal-Mart Stores Inc.’s long-rumored announcement that it had acquired online clothier Bonobos. Amazon, after all, is the company that used to time press releases about its jewelry category for days when online rival Blue Nile Inc. released its quarterly earnings.
But let’s assume Amazon’s purchase goes through. It will be by far the largest deal in Amazon’s history, and a monumental challenge to integrate Whole Foods’s 460 outlets and 90,000 employees. Here are four quick ideas for what Amazon can do over the next year or so to take advantage of its shiny new asset. If you can stomach anymore Amazon contemplation, I’d love to hear yours as well.
Add Whole Foods inventory to Amazon Fresh. I personally stopped buying from Amazon Fresh a few months ago and moved to Instacart Inc. Selection was poor and prices were high. By adding Whole Foods products to Amazon Fresh and expanding Fresh to the major cities it doesn’t yet serve, Amazon can immediately make its grocery delivery service competitive with services offered by Walmart, Safeway and Fresh Direct.
Modernize the Whole Foods checkout line. For anyone who doesn’t use Apple Pay and its ilk, Amazon could add another way to sail through the supermarket checkout line. Considering the cashier-less technology being tested at the Amazon Go prototype store in Seattle doesn’t quite seem ready for prime time, the checkout line at the handful of Amazon Books stores seems like a better model. Cashiers scan products, then scan the barcode on a customer’s Amazon app and charge their Amazon account. The company could offer discounts for anyone shopping in Whole Foods in this way. This would allow it to fulfill a stated goal to not “use no-checkout technology to automate the jobs of cashiers at Whole Foods” and avoid job cuts.
Lower prices. The “Whole Paycheck” reputation doesn’t jibe with Amazon’s standing as a retailer that offers competitive prices on all products. Under the protection of Amazon’s famously profit-thin balance sheet, Whole Foods will have the leeway to cut prices on key items. Amazon could find ways to give Prime members discounts on everyday essentials like fruits, vegetables and milk. Bloomberg reported price cuts are in the cards.
Keep competing with Whole Foods. Just as Amazon kept selling shoes after it bought Zappos and diapers after it acquired Diapers.com, I can’t imagine Amazon will slow down its own efforts to test Amazon-branded supermarkets and grocery pickup locations. Whole Foods’s crowded, chaotic stores probably aren’t the best place to experiment with new kinds of automation and payment technologies anyway. If Amazon wants to pioneer the future of food shopping, it still needs to invent on a clean slate. —Brad Stone
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