3 reasons Amazon is killing the soul of Whole Foods and turning it into a trojan horse
It was a pretty shocking moment when Amazon ( NASDAQ: AMZN ) acquired Whole Foods for $13.7 Billion USD. With hindsight, it wasn’t quite so shocking, but it felt weird, and to be honest set many of us “foodies” on edge. It was as if Walmart had decided to buy Emporio Armani, not totally out of the realm of possibility since they both make clothes, but somehow wrong. In the ensuing year plus, I’ve watched my beloved brand melt as it begins to revolve around it’s new hot sun. Which brings me to the three reasons Amazon is killing the soul of Whole Foods (and using it as a Trojan Horse).
#1 - Focusing on price is just a race to the bottom.
This strategy is wrong for so very many reasons, not the least of which is, I’m not clear it’s possible to out Walmart, Walmart (more on that later). They have perfected the art of cheap, and even with Amazon’s tech, there’s the other core issue, people who are price sensitive don’t tend to be the pickiest of consumers and thus not WF’s audience. Not to say that I’m against a good deal, but I’m betting that your average Walmart consumer isn’t a big consumer of say, stilton, or truffle fries, or Wagyu beef. So who exactly do you think you’re competing with? The fancy European speciality markets of the world? Not a lot of bucks there. Perhaps it’s about capturing more of the gourmet market share? Hmm, I think whole foods already had it, and to be honest, we’re not going to buy an extra pound of serrano ham just because it’s on sale. Why didn’t you just buy safeway if that was what you wanted? Making things cheaper just cuts your margins, which means you’ll offer workers less benefits and pay to make sure you make the profit. I think there’s an ulterior motive, but regardless, that leads me to reason number 2.
#2 - Amazon is an ai, machine learning Nobel laureate, high touch retail? Not so much…
Let’s face it, a lot of what made Whole Foods so great was not only could I find single origin estate grown darjeeling tea that I would gladly play $25 per 1/4 lb for. I could also have a lengthy conversation with the tattooed lady behind the cheese counter about the merits of serving manchego vs. a domestic triple cream camembert at my moroccan themed dinner party (yes, that happened). I paid for the quality, the availability of exotic ingredients AND someone who could guide me when I needed a little help. That is sadly disappearing fast.
I’ve been to at least four different Whole foods in the bay area several times in the last year, and I may as well have been walking in to a Krogers. I asked for help with the bulk bin because something wasn’t dispensing, and I got “well, I don’t know, maybe you could stick something up there and get it out.” When I asked about buddhas hand lemon (which I used to be able to get occasionally), I was told that they didn’t carry that brand of soda. Then last week, several cashiers were loudly complaining about a woman who had been complaining about the price of a product which was legitimately in error. That same cashier didn’t even know how what to do when my app didn’t scan correctly. Blank shrug, next time.
The people made Whole Foods, the institutional and food knowledge they possessed. Amazon knows nothing about high touch retail, and in fact they recently talked about opening 3,000 clerkless Amazon Go stores (scratching head, I see a theme). Perhaps their end game is to convert every whole foods into an Amazon Whole Foods Go store, then they can get rid of 60%+ of the workers and let us all research our choice of Organic non-GMO fair trade blue corn tortilla chips on our phones before we walk out, without ever having to talk to anyone. It seems to me that this is all about the disintermediation of retail and the wholesale removal of the working class. Seems a bit depressing, but makes for great profit margins. That lands me on my last point.
#3 - Amazon really is trying to out Walmart Walmart
Safeway, Krogers, Wegman’s, Walmart they were all either too big or too old school for Amazon to take over and mold into its version of the future of shopping. Plus, their clientele were too scattered, or not technologically savvy enough. They needed a company still in growth mode, yet established. Something with a well known and liked brand, and with a consumer that was going to be open to digitization, technology and other forms of optimization that required a mindset open to change. Whole foods was about as close as they were going to get to a trojan horse for gaining acceptance of their amazon go store model.
In the end, Amazon Go will be to Whole Foods as AWS was to the Original Amazon. Amazon will use Whole Foods as a training dataset to perfect its Amazon Go platform, which it will then sell to every retailer in the world at a huge margin.