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This is a great discussion of company culture, treatment of employees, worker cooperatives, etc., but I hoped HN would go deeper into the business and technolog

This is a great discussion of company culture, treatment of employees, worker cooperatives, etc., but I hoped HN would go deeper into the business and technology implications. What is the strategic logic behind this move? NYT, WaPo, WSJ, Bloomberg all take the same line: this is about Amazon's expansion into brick-and-mortar retail. They need a physical footprint, knock out Instacart for delivery, accelerate Amazon Go, and so on. But is this really Amazon's play here? Seems to me this is just the superficial and obvious rationale, and these analysts completely missed the bigger implications. Since Amazon said they're not renaming the stores, how can this be about Amazon's brick-and-mortar expansion? Seems more likely that Amazon's strategy is actually the opposite of this. Instead, maybe the bigger opportunity is to "Amazonify" a good brand, good people, good merchandising and thousands of relationships with good suppliers. Customers already trust Whole Foods and they like the assortment, but (1) only a small percentage of the population has access to a store, and (2) an even smaller percentage of the population can afford it. What if this is about taking the Whole Foods concept online in a big way ... make it dramatically more efficient, aggressively lower prices, and deliver all this goodness to a far larger percentage of the population? Whole Foods market share is less than 2%. Amazon could turn this $13 billion business into a $130 billion business by plugging WF into Amazon's existing apparatus for merchandising, pricing, inventory control, online sales, logistics, and direct-to-consumer delivery. Taking WF market share up from 2% to 20% is a much bigger opportunity than going the other direction, and just using WF stores to sell Amazon's grocery assortment.

TAForObvReasons 9y ago
It's worth pointing out that the purchase, as based on today's price action, was effectively "free". Amazon market cap went up 3.5% as of the current tick, roughly $15.5B. The market effectively rewarded AMZN for the transaction far beyond the actual $13.7B tender offer!
- KekDemaga 9y ago
  That is a great observation. Something like that is unimaginable to me.
  - Applejinx 9y ago
    You've got to be able to understand it, though, to make sense of market capitalism. Basically if the stock went up the price of that acquisition plus two billion dollars, that is a very powerful price signaling and a difficult command to disobey. It means there's an opportunity cost: all other things being equal, it would cost Amazon two billion dollars in market capitalization to NOT do whatever the hell Wall Street THINKS they're going to do with Whole Foods. Maybe the market thinks they're going to use them as bases for grocery distribution: reward, the cost of acquisition plus a bonus two billion. Maybe the market thinks they're going to gut the company, fire everybody, and then there's one less competitor for what Amazon means to do with groceries! Maybe the market thinks they'll take the existing Amazon grocery stuff and rebrand it Whole Foods and the rabble will buy into that for a time. The point is that this money really isn't free: it's conditional on whether Amazon does what the investors think they're gonna do, with the acquisition. If Amazon fails to do that, the market capitalization can evaporate. My own hunch is that the market thinks Amazon is super efficient and acquisitive, and that Whole Foods is weak and inefficient and misguided. As such, the expectation of greedy and amoral investors is that Amazon will take over and whip Whole Foods into shape, maybe even fire everybody and replace 'em with Amazonians, and that will make Whole Foods 'better' and justify the exercise. They certainly aren't buying into Whole Foods' 'enlightened' memes: that has no place on Wall Street. So I'm guessing it's BECAUSE Whole Foods has been 'enlightened' that the prospect of wrecking that so motivates investors. They figure that the Amazon way is clearly the winning way, and they figure there will be a BIG difference in how things are done, and it's a difference they characterize as 'good for capital', so there's a synergistic effect that makes it 'free' for Amazon plus a bonus. And then Amazon is obligated to do what's expected of them, which I think is probably kinda predictable.
- prewett 9y ago
  No, they are paying in cash, not stock. The company sold the stock a long time ago, so whatever the stock does has no impact on the company. The stockholders, however, benefited 3.5%, assuming they sell now.
  - examancer 9y ago
    This is not accurate. Companies hold back some stock during their IPO for various reasons. Amazon held back 23 million shares. It also has repurchased a fair number of shares it holds as "treasury stock" on its balance sheet that appears to have netted them a few billion in appreciation. This of course pales in comparison to the 478 million outstanding shares, so, you are correct: their shares don't appreciate nearly enough from the $15 billion surge in market cap to pay for the $13.7 billion purchase. However, to say "whatever the stock does has no impact on the company" is also inaccurate.
    - megablast 9y ago
      Sure, but they aren't taking advantage of this rise unless they sell more stock, right.
      - thrill 9y ago
        Stock price is fungible (with good management) - the increased value can have effect elsewhere.
  - drtz 9y ago
    The cash itself is owned by the shareholders.
    - dragonwriter 9y ago
      No, the cash is owned by the corporation. The shareholders own the right to participate in corporate governance in the degree appropriate to the particular shares they own, and own the right to take ownership of a particular share of the net assets if and when the corporation should be dissolved. They do not, either in theory or in practice, own the assets of the corporation while it exists.
- acchow 9y ago
  This is synergy. The market thinks that WFM + AMZN together as one is worth more than the sum of their parts. I should hope so. "effectively free" is a strange label to give this.
  - deleted 9y ago
    [deleted]
- visvavasu 9y ago
  Thanks
laretluval 9y ago
> Customers already trust Whole Foods and they like the assortment, but (1) only a small percentage of the population has access to a store, and (2) an even smaller percentage of the population can afford it. > What if this is about taking the Whole Foods concept online in a big way ... make it dramatically more efficient, aggressively lower prices, and deliver all this goodness to a far larger percentage of the population? Efficiency and cheapness would go against the Whole Foods brand.
- muninn_ 9y ago
  Only if you erode their core customer values and degrade the products. I find it easy to imagine a more streamlined business with more affordable prices in Whole Foods. Why not?
- SaintGhurka 9y ago
  > Efficiency and cheapness would go against the Whole Foods brand. For their existing customers, yes, but WF has become an aspirational brand. What if the play is to gain a large number of less affluent customers by WF-labeling lots of inexpensive things? Search Amazon for some commodity like corn meal, or rolled oats. There's a huge price difference between Quaker brand and Bob's Red Mill. Amazon could insert Whole Foods brand right in the middle and skim customers from both ends while maintaining handsome margins.
- jack9 9y ago
  > Efficiency and cheapness would go against the Whole Foods brand. I don't know what this means. The WF experience has nothing to do with these things. The price (cheap or less-than-expensive) and efficiency (I think you mean availability?) aren't really important, other than they are successful in the same way Trader Joes is successful, in fewer locations.
- puranjay 9y ago
  What if you increase efficiency and cheapness in non visible areas that customers don't get to see?
Shivetya 9y ago
To me I fail to see the value because Aldi is here and expanding and now Lidi is following. while they may be on the opposite end of the market from Whole foods I do think they are where the market will truly end up. The middle to higher end grocery stores are going to face a tough time with the discounters and we have yet to see if the European model of grocery can covert a large number of shoppers. with regards to the purchase I can imagine cobranding or in store only advertising. perhaps they can use it let people pick up orders themselves? Online grocery ordering but only where a Whole Foods store is available.
- eric_the_read 9y ago
  The value is that Aldi is nowhere near here, and Lidi is completely un-heard-of. The only reason I know about Aldi is that I spent a couple of years working in Chicago (and living further out), and even there I had to drive a long ways out of my way to find an Aldi. I think I went once in the 2 years I was there. Whole Foods is everywhere.
  - eric_the_read 9y ago
    Well, I'm wrong. There are ~430 WF locations worldwide; there are 1,600 Aldis in the US. it's just that aside from southern California, they don't seem to have a lot of locations in the West. My closest Aldi is ~550 miles away; my closest Whole Foods is a lot closer.
  - thinkling 9y ago
    FYI Aldi also owns Trader Joe's. EDIT: apparently I was effectively wrong, different Aldis: https://news.ycombinator.com/item?id=14569051 https://news.ycombinator.com/item?id=14569051
  - KGIII 9y ago
    No. There is no Whole Foods within 100 miles of me, and I am in the continental US.
irinai13 9y ago
Agreed. My first thought was: "Sweet, now prices will come down, WF stores will probably have come out with some innovations we didn't even know we needed but then won't imaging living without and overall customer experience will be awesome." They're going to figure out how to take WF to the next level.
icantdrive55 9y ago
I think Bezo just saw a great company, and bought it. That's it. If he ruins it, you will see it in the employee's faces.
dilemma 9y ago
I don't think anyone thought that Amazon would rebrand the stores. I think what you wrote is the obvious thing to most observers.
rmc 9y ago
> Since Amazon said they're not renaming the stores, how can this be about Amazon's brick-and-mortar expansion? Sure they say that now...

TAForObvReasons 9y ago

It's worth pointing out that the purchase, as based on today's price action, was effectively "free". Amazon market cap went up 3.5% as of the current tick, roughly $15.5B. The market effectively rewarded AMZN for the transaction far beyond the actual $13.7B tender offer!

KekDemaga 9y ago
That is a great observation. Something like that is unimaginable to me.
- Applejinx 9y ago
  You've got to be able to understand it, though, to make sense of market capitalism. Basically if the stock went up the price of that acquisition plus two billion dollars, that is a very powerful price signaling and a difficult command to disobey. It means there's an opportunity cost: all other things being equal, it would cost Amazon two billion dollars in market capitalization to NOT do whatever the hell Wall Street THINKS they're going to do with Whole Foods. Maybe the market thinks they're going to use them as bases for grocery distribution: reward, the cost of acquisition plus a bonus two billion. Maybe the market thinks they're going to gut the company, fire everybody, and then there's one less competitor for what Amazon means to do with groceries! Maybe the market thinks they'll take the existing Amazon grocery stuff and rebrand it Whole Foods and the rabble will buy into that for a time. The point is that this money really isn't free: it's conditional on whether Amazon does what the investors think they're gonna do, with the acquisition. If Amazon fails to do that, the market capitalization can evaporate. My own hunch is that the market thinks Amazon is super efficient and acquisitive, and that Whole Foods is weak and inefficient and misguided. As such, the expectation of greedy and amoral investors is that Amazon will take over and whip Whole Foods into shape, maybe even fire everybody and replace 'em with Amazonians, and that will make Whole Foods 'better' and justify the exercise. They certainly aren't buying into Whole Foods' 'enlightened' memes: that has no place on Wall Street. So I'm guessing it's BECAUSE Whole Foods has been 'enlightened' that the prospect of wrecking that so motivates investors. They figure that the Amazon way is clearly the winning way, and they figure there will be a BIG difference in how things are done, and it's a difference they characterize as 'good for capital', so there's a synergistic effect that makes it 'free' for Amazon plus a bonus. And then Amazon is obligated to do what's expected of them, which I think is probably kinda predictable.
prewett 9y ago
No, they are paying in cash, not stock. The company sold the stock a long time ago, so whatever the stock does has no impact on the company. The stockholders, however, benefited 3.5%, assuming they sell now.
- examancer 9y ago
  This is not accurate. Companies hold back some stock during their IPO for various reasons. Amazon held back 23 million shares. It also has repurchased a fair number of shares it holds as "treasury stock" on its balance sheet that appears to have netted them a few billion in appreciation. This of course pales in comparison to the 478 million outstanding shares, so, you are correct: their shares don't appreciate nearly enough from the $15 billion surge in market cap to pay for the $13.7 billion purchase. However, to say "whatever the stock does has no impact on the company" is also inaccurate.
  - megablast 9y ago
    Sure, but they aren't taking advantage of this rise unless they sell more stock, right.
    - thrill 9y ago
      Stock price is fungible (with good management) - the increased value can have effect elsewhere.
- drtz 9y ago
  The cash itself is owned by the shareholders.
  - dragonwriter 9y ago
    No, the cash is owned by the corporation. The shareholders own the right to participate in corporate governance in the degree appropriate to the particular shares they own, and own the right to take ownership of a particular share of the net assets if and when the corporation should be dissolved. They do not, either in theory or in practice, own the assets of the corporation while it exists.
acchow 9y ago
This is synergy. The market thinks that WFM + AMZN together as one is worth more than the sum of their parts. I should hope so. "effectively free" is a strange label to give this.
- deleted 9y ago
  [deleted]
visvavasu 9y ago
Thanks

laretluval 9y ago

> Customers already trust Whole Foods and they like the assortment, but (1) only a small percentage of the population has access to a store, and (2) an even smaller percentage of the population can afford it. > What if this is about taking the Whole Foods concept online in a big way ... make it dramatically more efficient, aggressively lower prices, and deliver all this goodness to a far larger percentage of the population? Efficiency and cheapness would go against the Whole Foods brand.

muninn_ 9y ago
Only if you erode their core customer values and degrade the products. I find it easy to imagine a more streamlined business with more affordable prices in Whole Foods. Why not?
SaintGhurka 9y ago
> Efficiency and cheapness would go against the Whole Foods brand. For their existing customers, yes, but WF has become an aspirational brand. What if the play is to gain a large number of less affluent customers by WF-labeling lots of inexpensive things? Search Amazon for some commodity like corn meal, or rolled oats. There's a huge price difference between Quaker brand and Bob's Red Mill. Amazon could insert Whole Foods brand right in the middle and skim customers from both ends while maintaining handsome margins.
jack9 9y ago
> Efficiency and cheapness would go against the Whole Foods brand. I don't know what this means. The WF experience has nothing to do with these things. The price (cheap or less-than-expensive) and efficiency (I think you mean availability?) aren't really important, other than they are successful in the same way Trader Joes is successful, in fewer locations.
puranjay 9y ago
What if you increase efficiency and cheapness in non visible areas that customers don't get to see?

Shivetya 9y ago

To me I fail to see the value because Aldi is here and expanding and now Lidi is following. while they may be on the opposite end of the market from Whole foods I do think they are where the market will truly end up. The middle to higher end grocery stores are going to face a tough time with the discounters and we have yet to see if the European model of grocery can covert a large number of shoppers. with regards to the purchase I can imagine cobranding or in store only advertising. perhaps they can use it let people pick up orders themselves? Online grocery ordering but only where a Whole Foods store is available.

eric_the_read 9y ago
The value is that Aldi is nowhere near here, and Lidi is completely un-heard-of. The only reason I know about Aldi is that I spent a couple of years working in Chicago (and living further out), and even there I had to drive a long ways out of my way to find an Aldi. I think I went once in the 2 years I was there. Whole Foods is everywhere.
- eric_the_read 9y ago
  Well, I'm wrong. There are ~430 WF locations worldwide; there are 1,600 Aldis in the US. it's just that aside from southern California, they don't seem to have a lot of locations in the West. My closest Aldi is ~550 miles away; my closest Whole Foods is a lot closer.
- thinkling 9y ago
  FYI Aldi also owns Trader Joe's. EDIT: apparently I was effectively wrong, different Aldis: https://news.ycombinator.com/item?id=14569051 https://news.ycombinator.com/item?id=14569051
- KGIII 9y ago
  No. There is no Whole Foods within 100 miles of me, and I am in the continental US.

irinai13 9y ago

Agreed. My first thought was: "Sweet, now prices will come down, WF stores will probably have come out with some innovations we didn't even know we needed but then won't imaging living without and overall customer experience will be awesome." They're going to figure out how to take WF to the next level.

icantdrive55 9y ago

I think Bezo just saw a great company, and bought it. That's it. If he ruins it, you will see it in the employee's faces.

dilemma 9y ago

I don't think anyone thought that Amazon would rebrand the stores. I think what you wrote is the obvious thing to most observers.

rmc 9y ago

> Since Amazon said they're not renaming the stores, how can this be about Amazon's brick-and-mortar expansion? Sure they say that now...