4 ms·

Why Amazon Is Such a Threat to the Grocery Industry

14 points by kposehn 9y ago

petra 9y ago
So Amazon is such a big threat because it promises(via PR) to make organic food cheap enough for everybody ? A task that doesn't sound very realistic ? How reliable is big company PR anyway ? how much of those big declarations come to be ? and how much is just for the ears of the stock market ?
- milesvp 9y ago
  Organic food is already becoming cheaper due to it being available even at low end grocery stores. Whole Food's margins have been falling for years due to this fact. What I find interesting is that Amazon intentionally keeps their operating margins at 4%. This is a reason they are very hard to compete with. What I find interesting about the grocery purchase, is that most grocery stores have very small margins already, and I wonder how much this signals the beginning of Amazon buying into lots of other low margin businesses.
sharemywin 9y ago
Or another possibility is whole foods becomes a huge drag on the company especially the AWS area and google, Microsoft and others start taking share from them.
- sharemywin 9y ago
  can't see a lot of grocery companies wanting to stay on AWS.
dcole2929 9y ago
The reasons Amazon is dangerous in every consumer industry dealing with physical goods are the same. Logistics and a multi billion dollar war chest. Amazons logistics solutions are unparalleled. If Amazon can make Whole Food more efficient shipping goods and gain even a single percentage point in profits that's huge. And the billions they have to play with means they can afford to be more aggressive in pursuing market share, and riskier in pursuing additional revenue streams. If you're subsisting on 1.5% margins you literally can't afford to bet on something new and it not pay off.
beautifulfreak 9y ago
How much does advertising and marketing add to the price of products in grocery stores? Can Amazon reduce that extra cost by reaching people in new ways, or by creating its own brands? Store brands are generally pretty good and cost less. Maybe it's food manufacturers that should be worried, not retailers. The premium one pays for advertised brands might become a thing of the past.

14 points by kposehn 9y ago

So Amazon is such a big threat because it promises(via PR) to make organic food cheap enough for everybody ? A task that doesn't sound very realistic ? How reliable is big company PR anyway ? how much of those big declarations come to be ? and how much is just for the ears of the stock market ?

milesvp 9y ago
Organic food is already becoming cheaper due to it being available even at low end grocery stores. Whole Food's margins have been falling for years due to this fact. What I find interesting is that Amazon intentionally keeps their operating margins at 4%. This is a reason they are very hard to compete with. What I find interesting about the grocery purchase, is that most grocery stores have very small margins already, and I wonder how much this signals the beginning of Amazon buying into lots of other low margin businesses.

sharemywin 9y ago

Or another possibility is whole foods becomes a huge drag on the company especially the AWS area and google, Microsoft and others start taking share from them.

sharemywin 9y ago
can't see a lot of grocery companies wanting to stay on AWS.

dcole2929 9y ago

The reasons Amazon is dangerous in every consumer industry dealing with physical goods are the same. Logistics and a multi billion dollar war chest. Amazons logistics solutions are unparalleled. If Amazon can make Whole Food more efficient shipping goods and gain even a single percentage point in profits that's huge. And the billions they have to play with means they can afford to be more aggressive in pursuing market share, and riskier in pursuing additional revenue streams. If you're subsisting on 1.5% margins you literally can't afford to bet on something new and it not pay off.

beautifulfreak 9y ago

How much does advertising and marketing add to the price of products in grocery stores? Can Amazon reduce that extra cost by reaching people in new ways, or by creating its own brands? Store brands are generally pretty good and cost less. Maybe it's food manufacturers that should be worried, not retailers. The premium one pays for advertised brands might become a thing of the past.