Amazon/WholeFoods: The Gorilla in the Grocery Chain

Amazon/WholeFoods: The Gorilla in the Grocery Chain

We all saw @ChicagoPhotoSho’s tweet:

Bezos: “Alexa, buy me something from Whole Foods.”
Alexa: “Buying Whole Foods.”
Bezos: “Oh, Shit.”

In case you’ve been hiding under a rock, last week Amazon acquired Whole Foods in a deal valued at $13.7B, including the debt.

It certainly had an impact on Wal-Mart’s stock price, which dropped 4.6% after the announcement, while Amazon’s stock closed up 2.4% (Grocery stocks tank as ‘Amazon effect’ strikes fear in investors). We mention Wal-Mart in particular since, as Sara Perez reported in Techcrunch, Amazon wants to become Walmart before Walmart can become Amazon. Amazon and Wal-Mart have been locked in a pissing match for quite some time now, and in case you missed it, Wal-Mart bought Bonobos, which didn’t exactly shore up the damage Amazon can potentially do. True that Amazon seems more and more to be moving into brick-and-mortar, but Whole Foods? Everyman’s Online Store buying the Grocer to the One Percent? Ok, maybe ten percent.

“The Whole Foods’ shopper is not the Walmart shopper,” noted Gordon Haskett analyst Chuck Grom in the New York Post. “One customer enjoys an annual income of $100K+ and the other pulls in $40-50K.”

While Wal-Mart is the largest purveyor of organic produce in the country, and Whole Foods is hardly known for its bargain basement pricing, Amazon is notorious for undercutting prices, to the point of taking a loss, in order to expand market share. Which they may well have to do, in the case of Whole Foods, known colloquially as ‘Whole Paycheck.’

What to speak of the fact that Grocery chain Aldi to open another 900 stores in U.S. Fresh produce. Considerable selection of organics. Low prices. Their own reasonably-priced brand of non-food merchandise. Sounds a bit like Amazon on a mom-and-popish level, what, eh? Millenials gravitate towards organic. Many of them are living at home longer. Mom and pop don’t necessarily want to pay Whole Foods prices, but the advent of 900 additional Aldi’s out there in the US. Amazon’s purchase of Whole Foods might not necessarily have been simply upping the stakes in its pissing match with Wal-Mart, but also a preemptive strike against Aldi and locking in the Millenial market. (Btw, Aldi is Trader Joe’s brother, for some context, but Trader Joe’s is not ubiquitous, outside of mostly metropolitan areas, and Aldi clearly plans to be). Dollars to cronuts, that announcement also affected Amazon’s plans to pull the trigger on Whole Foods.

But Aldi is not tech, so their expansion plans went unnoticed by the tech press, which does tend to cheer for Amazon over Wal-Mart – as does the tech industry at large – which we’ve always found curious, all things considered.

Wal-Mart has long been cast as an evil empire (Why People Love to Hate Walmart). As the article points out, “Some claim that Walmart is killing small businesses and they put profit over people. They accuse them of being overly competitive, predatory and a killer of Mom and Pop stores.”

And Amazon is different, how, exactly?

Gawker suggests that The Real Reason We Hate Wal-Mart is for “aesthetic reasons.” And never mind those big blue and yellow boxes that dot the American landscape, all laid out almost identically inside: we also see the people who work there, who are earning minimum wage, while we don’t actually see the Amazon warehouse employees or know what they’re experiencing while in the company’s service (The Life and Death of an Amazon Warehouse Temp What the future of low-wage work really looks like.). Nope. All we see are the smiling boxes that arrive on our doorsteps.

At the beginning of the Internet Era, the tech companies were the underdogs, the young upstarts who were disrupting the status quo and doing business in new ways. They were us. Of course, now that they’re the fat cats, let’s face it: it’s the same old, same old and considering its monopolistic practices and insatiable appetite for not only acquisition, but leaving its mammoth footprint on more and more areas and into more and more aspects of our lives and potentially creating a chokehold, is Amazon rather than Wal-Mart not more the evil empire in this equation?

Is it time to break up the big tech companies?, the LA Times asked last year, noting that even back then that “In the United States, Amazon increasingly dominates the retail landscape. It handles about 40% of all book sales. For online sales of all merchandise, Amazon’s market share keeps increasing; it’s estimated that, for each additional dollar Americans spend online this year, about 50 cents will be spent with Amazon.”

And that was last year. The government broke up Ma Bell in the 70s and went after Microsoft in the 90s (U.S. VS. MICROSOFT: THE OVERVIEW; U.S. JUDGE SAYS MICROSOFT VIOLATED ANTITRUST LAWS WITH PREDATORY BEHAVIOR), contending, in the case of Microsoft, that the company hurt consumers with its predatory practices and behavior. We see Amazon headed straight down that same slippery slope. As many an article has pointed out, Amazon now also threatens not only the large grocers, but startups including Instacart, Blue Apron, Hello Fresh, et al, as, in the case of the latters, all of the ingredients needed to replicate the meal ingredient delivery companies are conveniently at hand at Whole Foods. What to speak of Amazon’s delivery infrastructure. All the while, seemingly under the noses of regulators. No wonder all of those Amazon boxes are smiling. Or is that a smirk?

As Axios noted, “The world’s largest tech companies — Google, Facebook, Amazon, Microsoft and Apple — have become enormous concentrations of wealth and data, drawing the attention of economists and academics who warn they’re growing too powerful. “Platform companies have captured the economy,” said Jonathan Taplin, who argues in a new book and a recent NYT op-ed that the dominant platforms are so big that they’re undermining competition.” Which we knew and have reported on before. Remember: Google will have to change how it operates in Europe The EU will stick Google with a 1 billion euro fine over how it prioritizes Google Shopping.

In other words, it’s already starting. Attention is being paid and as Jim Cramer noted, “This is a threat to everybody who sells food because you can’t compete. Amazonthey will not let you compete.”

There’s always a method to the seeming madness. Remember: Jeff Bezos has long said that he wants to be the world’s store. Now, it seems, as purveyor of all things, and may well be that his true intention is to be the world’s company store, and considering the growing chatter about universal basic income and with more wealth and power being consolidated into the hands of fewer and fewer players, the concept might not be that far off the mark.


AMAZON, 1998: hello we sell books but online
AMAZON, 2023: please return to your Primehouse for your nightly Primemeal, valued Primecitizen

Not sure if it’s game over, or the real battle – re, anti-trust litigation, which is long overdue – is about to begin. We’ve never been pro-regulation, and in the case of the Bells, it didn’t exactly weigh in the consumers’ favor in the long run. Best to stop monopolies before they corner every market, and once you factor Amazon’s drone deliveries into the equation, while its purchase of Whole Foods was a brilliant move, this time, they may well have flown just a little too close to the sun. Onward and forward.


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