8 ms·

Winners and losers in Amazon’s $13.7B purchase of Whole Foods

33 points by smb06 9y ago

vaishaksuresh 9y ago
I am happy about this acquisition at least for deliveries. I've used Instacart extensively and they don't seem honest at all. Prices/fees are not transparent, I don't know who I'm tipping and how much of the tip the person actually gets and in the end I don't even get my groceries correctly.
PhantomGremlin 9y ago
The article didn't mention the biggest loser, viz the consumer. Amazon has already said they want to cut costs. I can't wait until they adopt their typical stocking practices, like they do with so much other stuff they sell. E.g. you'll have normal merchandise commingled on shelves side-by-side with third party supplied garbage. Much like they already do for DVDs and similar items, stocking genuine commingled with counterfeit. But don't worry, it'll all still be "fulfilled by Whole Foods". That's a little hyperbolic. But I just don't see any positives at all for current Whole Foods customers. Whole Foods most important asset is their reputation, which IMO is way way way above Amazon's reputation.
- wapz 9y ago
  > you'll have normal merchandise commingled on shelves side-by-side with third party supplied garbage I don't think this is fair or even reasonable to say. It's going to be in a B&M store. You can inspect the item. The FDA/whatever organization will be inspecting food on the shelves. As for reputation, Amazon has the best customer service (tied with companies like REI) in my opinion. I mostly agree that I don't see any positives for the customers at this point, but I don't think it's going the way of 3rd party counterfeit goods.
  - PhantomGremlin 9y ago
    As for reputation, Amazon has the best customer service (tied with companies like REI) in my opinion. Sorry, I very very strongly disagree. I buy very little from them any more because I don't trust the provenance. The saying is that a fish rots from the head down. Bezos and Amazon have proven time and time again that they don't really give a fuck about quality. Their one and only goal for the last 23 years has been to increase revenue, no matter the cost. Here's this gem: Amazon's Chinese counterfeit problem is getting worse[1]. Here's some choice quotes from that article that illustrate exactly what I'm saying: Always a problem, the counterfeiting issue has exploded this year, sellers say, following Amazon's effort to openly court Chinese manufacturers, weaving them intimately into the company's expansive logistics operation. To unsuspecting consumers, fake products can appear legitimate because of the Fulfillment by Amazon program, which lets manufacturers send their goods to Amazon's fulfillment centers and hand over a bigger commission, gaining the stamp of approval that comes with an FBA tag. Furthermore, Amazon's commingled inventory option bundles together products from different sellers, meaning that a counterfeit jacket could be sent to an Amazon facility by one merchant and actually sold by another. It's almost inevitable that the Amazon corporate culture that has allowed crap like that to get worse and worse over the years will eventually take over Whole Foods. [1] http://www.cnbc.com/2016/07/08/amazons-chinese-counterfeit-problem-is-getting-worse.html http://www.cnbc.com/2016/07/08/amazons-chinese-counterfeit-p...
    - wapz 9y ago
      Why are you tying customer service to quality of goods? If you don't like their quality of goods that is a fine reason to not buy from them, but I don't see anything in your argument disputing their customer service (the only part you quoted). If you receive a counterfeit item from Amazon (in my experience), they will 100% refund you the money instantly with almost no questions asked. They have also been refunding nexus 5x phones that die out of warranty (bootloop problem). > Their one and only goal for the last 23 years has been to increase revenue, no matter the cost. How can that be remotely true? Amazon has spent millions on R&D for the future, not for the current.
      - PhantomGremlin 9y ago
- adventured 9y ago
  > Whole Foods most important asset is their reputation, which IMO is way way way above Amazon's reputation. Amazon is routinely ranked by consumer surveys as being among the best companies to buy from. It has been that way for a long time. The average US consumer overwhelmingly disagrees with you, its reputation as far as consumers are concerned is drastically better than Whole Foods. https://www.forbes.com/sites/forbesinsights/2016/03/29/l-l-bean-amazon-and-nordstrom-are-customer-service-champions-according-to-consumers/ https://www.forbes.com/sites/forbesinsights/2016/03/29/l-l-b... https://www.forbes.com/sites/karstenstrauss/2016/03/29/americas-most-reputable-companies-2016-amazon-tops-the-list/ https://www.forbes.com/sites/karstenstrauss/2016/03/29/ameri... And this has been mostly unchanged for a decade, eg: "For the ninth consecutive year, customers ranked Amazon #1 in customer satisfaction during the holiday shopping season according to the newly-released ForeSee Experience Index: US Retail Edition. For their study, customer experience analytics firm ForeSee collected more than 67,600 surveys between November 29, 2013, and December 17, 2013, asking consumers to rate their satisfaction with the top 100 retailers." And "2015 Best and Worst Retail Customer Experiences - Customer Rankings in Temkin Research Report" (Amazon is ranked #4; Whole Foods is #22) https://www.thebalance.com/best-and-worst-customer-service-ratings-2892024 https://www.thebalance.com/best-and-worst-customer-service-r... And 2014 "Amazon Has the Best Consumer Perception of Any Brand" http://www.adweek.com/brand-marketing/amazon-has-best-consumer-perception-any-brand-158945/ http://www.adweek.com/brand-marketing/amazon-has-best-consum... And "Wal-Mart Stores Inc. is the largest retailer in the U.S. by sales, but when it comes to America’s favorites, Amazon.com Inc. dominates. In consultancy PwC’s annual global consumer survey, 52% of about 1,000 U.S. respondents listed Amazon, as one of their three favorite retailers in 2014, followed by 41% who named Wal-Mart, and 29% who listed Target" http://www.marketwatch.com/story/amazon-tops-wal-mart-in-this-ranking-2015-02-09 http://www.marketwatch.com/story/amazon-tops-wal-mart-in-thi... The references really don't stop going back a decade or more.
SeeDave 9y ago
Although it goes without saying that this is huge news, I have my concerns that the response was near-universal unbridled optimism. I'm a little interested in hearing how else this may play out in the spirit of "fearful when greedy, greedy when fearful" and welcome any contrarians to (respectfully) share their thoughts. As a side note: I've found the various armchair M&A proposals triggered by this rather amusing. Just this weekend I heard various people earnestly suggest that: 1. Wal-Mart purchases Rackspace and RIM 2. Google purchases Costco and Disney 3. Apple purchases Netflix and Target
- ido 9y ago
  The Apple/Netflix combination sounds a lot less far fetched than these other examples (with the iTunes store being a pretty serious business).
- kwelstr 9y ago
  How about Apple purchases Porsche and Netflix. That will make more sense.
clumsysmurf 9y ago
I think the customer is going to lose, eventually. I was chatting with a worker at WFM and they mentioned that WFM sends out inspectors to farms / suppliers to make sure things are up to high standards. Now compare that with Amazon, who co-mingles inventory and can't even guarantee what I purchased was authentic. Also, will I pay more for Kale after reading a book on food nutrition? Will I have to put the food in the basket to know what the price is? I see two very different cultures. Time well tell, I guess.
- gambiting 9y ago
  What's WFM?
  - nappy 9y ago
    Whole Foods Market. WFM was also their stock ticker.
- guelo 9y ago
  I always viewed Whole Foods much more cynically. Their supposed high quality is more about marketing to gullible liberals than anything else. The fact that they sell homeopathy sets off my scammer alarms.
  - csydas 9y ago
    With regards to homeopathic remedies, I would argue find store that sells any health products that doesn't have at least a small shelf dedicated to homeopathic remedies. I agree with you that the basis for the homeopathic remedies is non-sense, but it also strikes me as a caveat emptor, to a certain point. As for the other half, are you suggesting that only those of liberal politics would ever buy organic or fresh produce, or be taken in by the marketing of Whole Foods? The statement reads as a non-sequitur, and I'm not sure how it is relevant. Whole Foods sells an image and a promise of organic, and I'm pretty sure they will meet the current US legal definition of organic for whatever they're selling. It's not a relevant factor for me when buying, but I wouldn't call people who do buy there "gullible", as I'm pretty sure Whole Foods is giving the customer exactly what they want.
ouid 9y ago
This is a vertical merger no? When did that stop being illegal?
- kunaalarya 9y ago
  Why would this be an illegal one? It has the potential to be a big force one day but nothing near that now and WF and grocery delivery both have lots of competition.
- adventured 9y ago
  Vertical mergers have never been illegal, ie it never started being illegal. The combined Amazon + Whole Foods will have only a few percent of the US grocery market (around 3.x% if I recall correctly), which is highly fragmented. Walmart by comparison, has around 16% of the US grocery market.
orionblastar 9y ago
Oddly Amazon has been forced to collect a sales tax in some states. So buying a retail company would be in their best interests to have a place to sell to locals. Walmart and others complained about Amazon stealing customers and had the states crack down on them for state sales tax. In my area near Ferguson and Hazelwood Missouri Amazon plans a wharehouse. They should buy out Sears and K-Mart because they are closing down stores near us that Amazon can use as shops to ship packages to from their warehouse to compete with Walmart, Costco, and Sam's Club.
- techsupporter 9y ago
  > Walmart and others complained about Amazon stealing customers and had the states crack down on them for state sales tax. This is one of those rare instances where I'm going to agree with Wal-Mart here. Yes, residents of an area with a sales tax are supposed to remit that tax to the local government. No, virtually nobody actually does this. Wal-Mart was at a legal disadvantage because it is following the local law that says "if you have a sales presence here, you must collect sales tax here." Amazon shouldn't be able to skirt that by saying "oh, our warehouses are technically owned by Amazon Warehouse Services, LLC and not the actual Amazon.com, Inc. that actually sold the products." (Yes, I know the lore about how Bezos deliberately started Amazon in Washington State because, at the time, Washington was a smaller market compared to the ones he wanted to sell into "tax free," so that only proves my point about the deliberate tax dodge.)
  - votepaunchy 9y ago
    States are Constitutionally prohibited from taxing interstate commerce. Congress had to fix the problem (at their pace) of Amazon (and others) not paying sales tax to states in which it did not have a physical presence.
amelius 9y ago
I'm wondering if there is a limit to economies of scale. Is there some point where it doesn't matter cost-wise to produce N+1 instead of N? Will Amazon gobble up the rest of the world and bring the economy to a halt?
- threepipeproblm 9y ago
  https://en.wikipedia.org/wiki/Diseconomies_of_scale https://en.wikipedia.org/wiki/Diseconomies_of_scale
Shivetya 9y ago
I am still unconvinced it was a good move. Both European discount grocery chains are in the US now, Aldi and Lidl. Aldi has had a presence here already and Lidl is now coming in strong. The traditional grocery store chains are all challenged by these foreign discounters who can even undercut Wal Mart grocery at times; though Wal Mart does carry name brands as well. Gourmet and similar grocery stores operate on the fringe but how much disposable income is out there to keep them all going? Do they really compete with Kroger and the like? To me its like comparing Costco to WalMart. Sure they had similar items but they have wildly different customer bases and income levels.

33 points by smb06 9y ago

I am happy about this acquisition at least for deliveries. I've used Instacart extensively and they don't seem honest at all. Prices/fees are not transparent, I don't know who I'm tipping and how much of the tip the person actually gets and in the end I don't even get my groceries correctly.

PhantomGremlin 9y ago

The article didn't mention the biggest loser, viz the consumer. Amazon has already said they want to cut costs. I can't wait until they adopt their typical stocking practices, like they do with so much other stuff they sell. E.g. you'll have normal merchandise commingled on shelves side-by-side with third party supplied garbage. Much like they already do for DVDs and similar items, stocking genuine commingled with counterfeit. But don't worry, it'll all still be "fulfilled by Whole Foods". That's a little hyperbolic. But I just don't see any positives at all for current Whole Foods customers. Whole Foods most important asset is their reputation, which IMO is way way way above Amazon's reputation.

wapz 9y ago
> you'll have normal merchandise commingled on shelves side-by-side with third party supplied garbage I don't think this is fair or even reasonable to say. It's going to be in a B&M store. You can inspect the item. The FDA/whatever organization will be inspecting food on the shelves. As for reputation, Amazon has the best customer service (tied with companies like REI) in my opinion. I mostly agree that I don't see any positives for the customers at this point, but I don't think it's going the way of 3rd party counterfeit goods.
- PhantomGremlin 9y ago
  As for reputation, Amazon has the best customer service (tied with companies like REI) in my opinion. Sorry, I very very strongly disagree. I buy very little from them any more because I don't trust the provenance. The saying is that a fish rots from the head down. Bezos and Amazon have proven time and time again that they don't really give a fuck about quality. Their one and only goal for the last 23 years has been to increase revenue, no matter the cost. Here's this gem: Amazon's Chinese counterfeit problem is getting worse[1]. Here's some choice quotes from that article that illustrate exactly what I'm saying: Always a problem, the counterfeiting issue has exploded this year, sellers say, following Amazon's effort to openly court Chinese manufacturers, weaving them intimately into the company's expansive logistics operation. To unsuspecting consumers, fake products can appear legitimate because of the Fulfillment by Amazon program, which lets manufacturers send their goods to Amazon's fulfillment centers and hand over a bigger commission, gaining the stamp of approval that comes with an FBA tag. Furthermore, Amazon's commingled inventory option bundles together products from different sellers, meaning that a counterfeit jacket could be sent to an Amazon facility by one merchant and actually sold by another. It's almost inevitable that the Amazon corporate culture that has allowed crap like that to get worse and worse over the years will eventually take over Whole Foods. [1] http://www.cnbc.com/2016/07/08/amazons-chinese-counterfeit-problem-is-getting-worse.html http://www.cnbc.com/2016/07/08/amazons-chinese-counterfeit-p...
  - wapz 9y ago
    Why are you tying customer service to quality of goods? If you don't like their quality of goods that is a fine reason to not buy from them, but I don't see anything in your argument disputing their customer service (the only part you quoted). If you receive a counterfeit item from Amazon (in my experience), they will 100% refund you the money instantly with almost no questions asked. They have also been refunding nexus 5x phones that die out of warranty (bootloop problem). > Their one and only goal for the last 23 years has been to increase revenue, no matter the cost. How can that be remotely true? Amazon has spent millions on R&D for the future, not for the current.
    - PhantomGremlin 9y ago
adventured 9y ago
> Whole Foods most important asset is their reputation, which IMO is way way way above Amazon's reputation. Amazon is routinely ranked by consumer surveys as being among the best companies to buy from. It has been that way for a long time. The average US consumer overwhelmingly disagrees with you, its reputation as far as consumers are concerned is drastically better than Whole Foods. https://www.forbes.com/sites/forbesinsights/2016/03/29/l-l-bean-amazon-and-nordstrom-are-customer-service-champions-according-to-consumers/ https://www.forbes.com/sites/forbesinsights/2016/03/29/l-l-b... https://www.forbes.com/sites/karstenstrauss/2016/03/29/americas-most-reputable-companies-2016-amazon-tops-the-list/ https://www.forbes.com/sites/karstenstrauss/2016/03/29/ameri... And this has been mostly unchanged for a decade, eg: "For the ninth consecutive year, customers ranked Amazon #1 in customer satisfaction during the holiday shopping season according to the newly-released ForeSee Experience Index: US Retail Edition. For their study, customer experience analytics firm ForeSee collected more than 67,600 surveys between November 29, 2013, and December 17, 2013, asking consumers to rate their satisfaction with the top 100 retailers." And "2015 Best and Worst Retail Customer Experiences - Customer Rankings in Temkin Research Report" (Amazon is ranked #4; Whole Foods is #22) https://www.thebalance.com/best-and-worst-customer-service-ratings-2892024 https://www.thebalance.com/best-and-worst-customer-service-r... And 2014 "Amazon Has the Best Consumer Perception of Any Brand" http://www.adweek.com/brand-marketing/amazon-has-best-consumer-perception-any-brand-158945/ http://www.adweek.com/brand-marketing/amazon-has-best-consum... And "Wal-Mart Stores Inc. is the largest retailer in the U.S. by sales, but when it comes to America’s favorites, Amazon.com Inc. dominates. In consultancy PwC’s annual global consumer survey, 52% of about 1,000 U.S. respondents listed Amazon, as one of their three favorite retailers in 2014, followed by 41% who named Wal-Mart, and 29% who listed Target" http://www.marketwatch.com/story/amazon-tops-wal-mart-in-this-ranking-2015-02-09 http://www.marketwatch.com/story/amazon-tops-wal-mart-in-thi... The references really don't stop going back a decade or more.

SeeDave 9y ago

Although it goes without saying that this is huge news, I have my concerns that the response was near-universal unbridled optimism. I'm a little interested in hearing how else this may play out in the spirit of "fearful when greedy, greedy when fearful" and welcome any contrarians to (respectfully) share their thoughts. As a side note: I've found the various armchair M&A proposals triggered by this rather amusing. Just this weekend I heard various people earnestly suggest that: 1. Wal-Mart purchases Rackspace and RIM 2. Google purchases Costco and Disney 3. Apple purchases Netflix and Target

ido 9y ago
The Apple/Netflix combination sounds a lot less far fetched than these other examples (with the iTunes store being a pretty serious business).
kwelstr 9y ago
How about Apple purchases Porsche and Netflix. That will make more sense.

clumsysmurf 9y ago

I think the customer is going to lose, eventually. I was chatting with a worker at WFM and they mentioned that WFM sends out inspectors to farms / suppliers to make sure things are up to high standards. Now compare that with Amazon, who co-mingles inventory and can't even guarantee what I purchased was authentic. Also, will I pay more for Kale after reading a book on food nutrition? Will I have to put the food in the basket to know what the price is? I see two very different cultures. Time well tell, I guess.

gambiting 9y ago
What's WFM?
- nappy 9y ago
  Whole Foods Market. WFM was also their stock ticker.
guelo 9y ago
I always viewed Whole Foods much more cynically. Their supposed high quality is more about marketing to gullible liberals than anything else. The fact that they sell homeopathy sets off my scammer alarms.
- csydas 9y ago
  With regards to homeopathic remedies, I would argue find store that sells any health products that doesn't have at least a small shelf dedicated to homeopathic remedies. I agree with you that the basis for the homeopathic remedies is non-sense, but it also strikes me as a caveat emptor, to a certain point. As for the other half, are you suggesting that only those of liberal politics would ever buy organic or fresh produce, or be taken in by the marketing of Whole Foods? The statement reads as a non-sequitur, and I'm not sure how it is relevant. Whole Foods sells an image and a promise of organic, and I'm pretty sure they will meet the current US legal definition of organic for whatever they're selling. It's not a relevant factor for me when buying, but I wouldn't call people who do buy there "gullible", as I'm pretty sure Whole Foods is giving the customer exactly what they want.

ouid 9y ago

This is a vertical merger no? When did that stop being illegal?

kunaalarya 9y ago
Why would this be an illegal one? It has the potential to be a big force one day but nothing near that now and WF and grocery delivery both have lots of competition.
adventured 9y ago
Vertical mergers have never been illegal, ie it never started being illegal. The combined Amazon + Whole Foods will have only a few percent of the US grocery market (around 3.x% if I recall correctly), which is highly fragmented. Walmart by comparison, has around 16% of the US grocery market.

orionblastar 9y ago

Oddly Amazon has been forced to collect a sales tax in some states. So buying a retail company would be in their best interests to have a place to sell to locals. Walmart and others complained about Amazon stealing customers and had the states crack down on them for state sales tax. In my area near Ferguson and Hazelwood Missouri Amazon plans a wharehouse. They should buy out Sears and K-Mart because they are closing down stores near us that Amazon can use as shops to ship packages to from their warehouse to compete with Walmart, Costco, and Sam's Club.

techsupporter 9y ago
> Walmart and others complained about Amazon stealing customers and had the states crack down on them for state sales tax. This is one of those rare instances where I'm going to agree with Wal-Mart here. Yes, residents of an area with a sales tax are supposed to remit that tax to the local government. No, virtually nobody actually does this. Wal-Mart was at a legal disadvantage because it is following the local law that says "if you have a sales presence here, you must collect sales tax here." Amazon shouldn't be able to skirt that by saying "oh, our warehouses are technically owned by Amazon Warehouse Services, LLC and not the actual Amazon.com, Inc. that actually sold the products." (Yes, I know the lore about how Bezos deliberately started Amazon in Washington State because, at the time, Washington was a smaller market compared to the ones he wanted to sell into "tax free," so that only proves my point about the deliberate tax dodge.)
- votepaunchy 9y ago
  States are Constitutionally prohibited from taxing interstate commerce. Congress had to fix the problem (at their pace) of Amazon (and others) not paying sales tax to states in which it did not have a physical presence.

amelius 9y ago

I'm wondering if there is a limit to economies of scale. Is there some point where it doesn't matter cost-wise to produce N+1 instead of N? Will Amazon gobble up the rest of the world and bring the economy to a halt?

threepipeproblm 9y ago
https://en.wikipedia.org/wiki/Diseconomies_of_scale https://en.wikipedia.org/wiki/Diseconomies_of_scale

Shivetya 9y ago

I am still unconvinced it was a good move. Both European discount grocery chains are in the US now, Aldi and Lidl. Aldi has had a presence here already and Lidl is now coming in strong. The traditional grocery store chains are all challenged by these foreign discounters who can even undercut Wal Mart grocery at times; though Wal Mart does carry name brands as well. Gourmet and similar grocery stores operate on the fringe but how much disposable income is out there to keep them all going? Do they really compete with Kroger and the like? To me its like comparing Costco to WalMart. Sure they had similar items but they have wildly different customer bases and income levels.