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I generally like Stratechery articles - but I found this one stretching to make everything fit into a nice, neat box - particularly the comparison of AWS to the

I generally like Stratechery articles - but I found this one stretching to make everything fit into a nice, neat box - particularly the comparison of AWS to the Grocery business. I found the graphics representing rather incomprehensible (perhaps I'm simply not bright enough to get them) and it feels like someone looking for a grand unifying theory of Amazon, as opposed to something simple: the grocery business is huge ($900b/year), Amazon wants to be a part of that channel. It's basically doing the opposite of Walmart. If there is a grand unifying theory of Amazon, I think it is also pretty simple: start with a specific niche in a category, dominate that and then grow. But that is hardly a unique approach in business. Amazon does, however, execute it extremely well.

Spooky23 9y ago
Thompson is good, but he gets blinders on for some things. Last year, Uber was going to be blowing our noses for us. I'd love to hear a devils advocate POV about Amazon from Ben.
- geodel 9y ago
  With your hints Thompson can come up with a strategy of a Global Nose Blowing Service. It can explain with neat diagrams how previous attempts failed and why in mid to long term most people on planet are going to use a modularized GNBS instead of doing it in old fashioned way.
jimbokun 9y ago
"the grocery business is huge ($900b/year), Amazon wants to be a part of that channel." I think that fits with his analysis. His take on Amazon is they want a small piece of every single economic transaction, literally. So he is predicting Amazon's end goal isn't to make Whole Foods into the dominant grocery chain. But to insinuate themselves so they have a cut of every grocery transaction, whether it's Whole Foods or any other grocery store making the final sale to the customer.
- inthewoods 9y ago
  Oh I agree - but I think his attempts to link that idea back to a grand unifying theory of Amazon, for me, just seemed forced.
- Domenic_S 9y ago
  The grocery business has brutally low margins (~1%). Bezos famously said "your margin is my opportunity", but there's no margin == no opportunity... at least as far as the traditional grocery business goes. There's some far deeper strategy going on here, lots of possibilities.
  - inthewoods 9y ago
    Agreed - definitely something bigger going on - although Whole Foods has net margins in the 3% range.
  - jaggederest 9y ago
    I think they're going for grocery logistics, not groceries themselves. There's still plenty of margin for guaranteeing timely, correct delivery of perishable goods. Think distributors, not retail stores. At least that's what I got from the article
  - deleted 9y ago
    [deleted]
Animats 9y ago
I found this one stretching to make everything fit into a nice, neat box. Yes. It's entirely possible that Amazon found Whole Foods for sale at such a low price that the stores don't matter much. It's the house brands which Amazon can distribute through their existing supply chain. Most of Whole Foods' house brands have reasonable shelf lives, so they can easily be slotted into the Amazon system. Using Amazon's package distribution system to fill the stores would be inefficient. Stores get product by the pallet, not the box. Supermarket distribution is semitrailers of pallets going direct from big refrigerated warehouses to big stores. Amazon isn't set up for that. It's not clear what Amazon will do with the stores. Probably put in Amazon lockers and cut the prices on the house brands at first.
- malandrew 9y ago
  Totally agree that all WF's white label products greatly increases the products available via Amazon Pantry. I would also say that Amazon is well positioned to send mixed-product pallets. Stores today get entire pallets of the same product. This is incredibly inefficient. Amazon is well positioned to use fulfillment centers and robots to create entire mixed product pallets of only the products sold on any given day at a store. This can greatly reduce the amount of unsold product in the supermarket supply chain to only the products sold on any given day. This also lets use less shelf space for a product and store a greater variety of products in the same space. Customers may also have the option of having specialty products sent to their nearest Whole Foods for when they do their next grocery trip. For example, my favorite honey, Tasmanian Leatherwood honey is only available on Amazon. I could choose to have that available at my local Whole Foods the following day. In fact, Amazon could detect that I have it in my cart, send it to the store proactively and notify me that I can have it at my local whole foods, prompting me to go in and buy more than planned.
- nickpsecurity 9y ago
  That's exactly how it works. They've already cost-cutted and streamlined it all about as much as it will get. Yet, it all reduces down to people pulling pallets from manufacturers off trucks, putting them somewhere, other people making custom pallets for stores from those pallets, shipping them, and then breaking those down at store for sale to customers. The only time I saw real innovation in that was Costco and its predecessor's brilliant decision to eliminate the store to just let people shop off the pallets and such in the warehouse. I think Amazon did try some stuff like having storage containers robotically come toward workers. They might have some tricks up their sleeves. The fundamental model is pretty basic and optimized, though, with competition driving margins down making it harder to optimize over time.
erikpukinskis 9y ago
They weren't comparing AWS to the grocery business. They were comparing the Amazon Book Store to the grocery business and positing that, like AWS, Amazon would use the grocery business to prove their just-in-time supply-chain-as-a-service product.
- inthewoods 9y ago
  He wasn't explicitly comparing the two, but saying that the three (books, AWS and grocery) were all part of the same formula/strategy.

Spooky23 9y ago

Thompson is good, but he gets blinders on for some things. Last year, Uber was going to be blowing our noses for us. I'd love to hear a devils advocate POV about Amazon from Ben.

geodel 9y ago
With your hints Thompson can come up with a strategy of a Global Nose Blowing Service. It can explain with neat diagrams how previous attempts failed and why in mid to long term most people on planet are going to use a modularized GNBS instead of doing it in old fashioned way.

jimbokun 9y ago

"the grocery business is huge ($900b/year), Amazon wants to be a part of that channel." I think that fits with his analysis. His take on Amazon is they want a small piece of every single economic transaction, literally. So he is predicting Amazon's end goal isn't to make Whole Foods into the dominant grocery chain. But to insinuate themselves so they have a cut of every grocery transaction, whether it's Whole Foods or any other grocery store making the final sale to the customer.

inthewoods 9y ago
Oh I agree - but I think his attempts to link that idea back to a grand unifying theory of Amazon, for me, just seemed forced.
Domenic_S 9y ago
The grocery business has brutally low margins (~1%). Bezos famously said "your margin is my opportunity", but there's no margin == no opportunity... at least as far as the traditional grocery business goes. There's some far deeper strategy going on here, lots of possibilities.
- inthewoods 9y ago
  Agreed - definitely something bigger going on - although Whole Foods has net margins in the 3% range.
- jaggederest 9y ago
  I think they're going for grocery logistics, not groceries themselves. There's still plenty of margin for guaranteeing timely, correct delivery of perishable goods. Think distributors, not retail stores. At least that's what I got from the article
- deleted 9y ago
  [deleted]

Animats 9y ago

I found this one stretching to make everything fit into a nice, neat box. Yes. It's entirely possible that Amazon found Whole Foods for sale at such a low price that the stores don't matter much. It's the house brands which Amazon can distribute through their existing supply chain. Most of Whole Foods' house brands have reasonable shelf lives, so they can easily be slotted into the Amazon system. Using Amazon's package distribution system to fill the stores would be inefficient. Stores get product by the pallet, not the box. Supermarket distribution is semitrailers of pallets going direct from big refrigerated warehouses to big stores. Amazon isn't set up for that. It's not clear what Amazon will do with the stores. Probably put in Amazon lockers and cut the prices on the house brands at first.

malandrew 9y ago
Totally agree that all WF's white label products greatly increases the products available via Amazon Pantry. I would also say that Amazon is well positioned to send mixed-product pallets. Stores today get entire pallets of the same product. This is incredibly inefficient. Amazon is well positioned to use fulfillment centers and robots to create entire mixed product pallets of only the products sold on any given day at a store. This can greatly reduce the amount of unsold product in the supermarket supply chain to only the products sold on any given day. This also lets use less shelf space for a product and store a greater variety of products in the same space. Customers may also have the option of having specialty products sent to their nearest Whole Foods for when they do their next grocery trip. For example, my favorite honey, Tasmanian Leatherwood honey is only available on Amazon. I could choose to have that available at my local Whole Foods the following day. In fact, Amazon could detect that I have it in my cart, send it to the store proactively and notify me that I can have it at my local whole foods, prompting me to go in and buy more than planned.
nickpsecurity 9y ago
That's exactly how it works. They've already cost-cutted and streamlined it all about as much as it will get. Yet, it all reduces down to people pulling pallets from manufacturers off trucks, putting them somewhere, other people making custom pallets for stores from those pallets, shipping them, and then breaking those down at store for sale to customers. The only time I saw real innovation in that was Costco and its predecessor's brilliant decision to eliminate the store to just let people shop off the pallets and such in the warehouse. I think Amazon did try some stuff like having storage containers robotically come toward workers. They might have some tricks up their sleeves. The fundamental model is pretty basic and optimized, though, with competition driving margins down making it harder to optimize over time.

erikpukinskis 9y ago

They weren't comparing AWS to the grocery business. They were comparing the Amazon Book Store to the grocery business and positing that, like AWS, Amazon would use the grocery business to prove their just-in-time supply-chain-as-a-service product.

inthewoods 9y ago
He wasn't explicitly comparing the two, but saying that the three (books, AWS and grocery) were all part of the same formula/strategy.