Is Whole Foods a healthy option for Amazon?

Comment

Image Credits:

Cyrus Radfar

Contributor

Cyrus Radfar is the founding partner at V1 Worldwide.

More posts from Cyrus Radfar

If you’ve been under a rock or staring at a fidget spinner over the past few days, you may have missed the news that Amazon is working to purchase Whole Foods for nearly $14 billion dollars.  The markets favored the new partnership as they pummeled their competitors.

Both companies have unlocked several short and long-term opportunities with this purchase.

Hundreds of New Fulfillment Locations<
As the business idiom goes — location, location, location. With hundreds of stores, fastidiously, placed in affluent locations, Whole Foods could be viewed as an incredible real-estate acquisition for Amazon.

The distance from the warehouse to the home determines how quickly we can get those batteries that we need, right now.

Amazon, currently, offers same day deliver in nine markets. In 2015, Piper Jeffray analysts predicted that households with an annual income greater than $50,000 are the core market for same day delivery. They also estimated that Amazon fulfillment locations were within approximately 20 miles of 50-65% of their target market. This acquisition moves Amazon from the outskirts into the neighborhood.

Every Whole Foods doubles as a return location, micro-warehouse, pick-up location, and, as we’ll discuss later, landing pad.

High-Price Meets Hyper-Efficient

Amazon and Whole Foods have projected very different images of themselves. We don’t think low-price products when we think Whole Foods. Whole Foods, which some of my friends call “whole wallet,” focuses on their high-quality, high-price, heavily curated selection. On the other hand, Amazon is known for their hyper-efficiency, value and choice.

For Amazon, the ability to distribute products they already sourced at a higher-margin is a boon for their business. In other words, the Whole Foods markup builds Amazon a highly profitable channel for their goods.

Whole Foods realized that they need to provide a lower price-point option to reach a larger market. Therefore they launched Whole Foods 365 “Where Quality Meets Savings” to address more prices sensitive consumers. With Amazon’s lower cost supply chain, Whole Foods 365 may have found what it needs to get prices down to a point where they can, not only, undercut Walmart and Costco but provide a more convenient experience to their button-loving consumers.

(Photo by Joe Raedle/Getty Images)

 

Enabling the Last Mile

Amazon has focused on getting their products to their customers efficiently since they were founded. Amazon Prime, Amazon Fresh, Amazon Flex (delivery), Amazon Fresh Pickup, andAmazon Go are all relatively recent forays the company has made to disrupt retail with faster delivery.

Taking a step back, let’s recall what each company has to offer. Amazon has a more sophisticated tech infrastructure, innovative online consumer experience, better fulfillment processes and inventory management. What Amazon lacks is the human face and the connection to our communities. The only smile many know of Amazon is their branding on the corrugated boxes.

Whole Foods has property in incredible locations, a strong brand, and tens of thousands of employees that serve their communities in their locations. These are the missing pieces that Amazon has needed to scale their “last mile” delivery.  It’s not easy to build a culture of service-drive people, and Whole Foods has an incredible staff that could support their new machine-driven parent.

Whole Foods currently has distribution partners like Instacart and Postmates who will likely lose a lot of business. They are just two services that could be cut-off in the future as Amazon has a new fulfillment location in our neighborhoods.

In NovemberAmazon announced that it was testing a new AI-powered store that didn’t require checkout. More recently, it was reported that their system was having a difficult time tracking when there were over twenty people in the store at any given time. Although this concept will come to market some time in the not-so-distant future, Whole Foods will provide an incredible testing ground once Amazon is ready to deploy their solution at-scale. This would allow us to treat Whole Foods like an extension of our refrigerators.

It’s still too early to know but we may look back and say that Amazon just acquired an entire fleet of drivers that could, if they wish, accomplish several activities for their new parent company.

(Photo by RJ Sangosti/The Denver Post via Getty Images)

 

The Machines are Coming

Lurking in the background of every future of technology discussion are two topics: drones and autonomous vehicles. Amazon has been quiet on the latter but it’s obvious that they could be a huge winner if they could deliver their own goods. However, there’s still was a major logistical issue for both of these endeavors — where do we take our vehicles and drones to re-charge and re-stock.

With this massive real-estate acquisiton, Amazon has inherited hundreds of local roofs and parking lots that could now re-charge and re-supply their fleets. As less and less of the population drives, these parking lots will allow expansion of the store and more room for other activities.

Cheers to a Convenient Future

The future of retail going to be interesting for all of us. It’s hard to deny that the market continues to create a world where we’re all going to have more time to watch Designated Survivor and The Housemaiden and less of a need to ever take time out to run errands.

We will choose the most convenient options that align with their pocket-book and values, in that order.

Over the past few years we’ve seen Amazon testing new ways of getting groceries in consumers fridges, with Amazon Fresh, Amazon Fresh Pickup, drone delivery, and Amazon Go. As I look back with this acquisition, I can’t help to think, “Were they just preparing for this the whole time or did they realize they couldn’t do it alone?”

More TechCrunch

To give AI-focused women academics and others their well-deserved — and overdue — time in the spotlight, TechCrunch has been publishing a series of interviews focused on remarkable women who’ve contributed to…

Women in AI: Rep. Dar’shun Kendrick wants to pass more AI legislation

We took the pulse of emerging fund managers about what it’s been like for them during these post-ZERP, venture-capital-winter years.

A reckoning is coming for emerging venture funds, and that, VCs say, is a good thing

It’s been a busy weekend for union organizing efforts at U.S. Apple stores, with the union at one store voting to authorize a strike, while workers at another store voted…

Workers at a Maryland Apple store authorize strike

Alora Baby is not just aiming to manufacture baby cribs in an environmentally friendly way but is attempting to overhaul the whole lifecycle of a product

Alora Baby aims to push baby gear away from the ‘landfill economy’

Bumble founder and executive chair Whitney Wolfe Herd raised eyebrows this week with her comments about how AI might change the dating experience. During an onstage interview, Bloomberg’s Emily Chang…

Go on, let bots date other bots

Welcome to Week in Review: TechCrunch’s newsletter recapping the week’s biggest news. This week Apple unveiled new iPad models at its Let Loose event, including a new 13-inch display for…

Why Apple’s ‘Crush’ ad is so misguided

The U.K. Safety Institute, the U.K.’s recently established AI safety body, has released a toolset designed to “strengthen AI safety” by making it easier for industry, research organizations and academia…

U.K. agency releases tools to test AI model safety

AI startup Runway’s second annual AI Film Festival showcased movies that incorporated AI tech in some fashion, from backgrounds to animations.

At the AI Film Festival, humanity triumphed over tech

Rachel Coldicutt is the founder of Careful Industries, which researches the social impact technology has on society.

Women in AI: Rachel Coldicutt researches how technology impacts society

SAP Chief Sustainability Officer Sophia Mendelsohn wants to incentivize companies to be green because it’s profitable, not just because it’s right.

SAP’s chief sustainability officer isn’t interested in getting your company to do the right thing

Here’s what one insider said happened in the days leading up to the layoffs.

Tesla’s profitable Supercharger network is in limbo after Musk axed the entire team

StrictlyVC events deliver exclusive insider content from the Silicon Valley & Global VC scene while creating meaningful connections over cocktails and canapés with leading investors, entrepreneurs and executives. And TechCrunch…

Meesho, a leading e-commerce startup in India, has secured $275 million in a new funding round.

Meesho, an Indian social commerce platform with 150M transacting users, raises $275M

Some Indian government websites have allowed scammers to plant advertisements capable of redirecting visitors to online betting platforms. TechCrunch discovered around four dozen “gov.in” website links associated with Indian states,…

Scammers found planting online betting ads on Indian government websites

Around 550 employees across autonomous vehicle company Motional have been laid off, according to information taken from WARN notice filings and sources at the company.  Earlier this week, TechCrunch reported…

Motional cut about 550 employees, around 40%, in recent restructuring, sources say

The company is describing the event as “a chance to demo some ChatGPT and GPT-4 updates.”

OpenAI’s ChatGPT announcement: What we know so far

The deck included some redacted numbers, but there was still enough data to get a good picture.

Pitch Deck Teardown: Cloudsmith’s $15M Series A deck

Unlike ChatGPT, Claude did not become a new App Store hit.

Anthropic’s Claude sees tepid reception on iOS compared with ChatGPT’s debut

Welcome to Startups Weekly — Haje‘s weekly recap of everything you can’t miss from the world of startups. Sign up here to get it in your inbox every Friday. Look,…

Startups Weekly: Trouble in EV land and Peloton is circling the drain

Scarcely five months after its founding, hard tech startup Layup Parts has landed a $9 million round of financing led by Founders Fund to transform composites manufacturing. Lux Capital and Haystack…

Founders Fund leads financing of composites startup Layup Parts

AI startup Anthropic is changing its policies to allow minors to use its generative AI systems — in certain circumstances, at least.  Announced in a post on the company’s official…

Anthropic now lets kids use its AI tech — within limits

Zeekr’s market hype is noteworthy and may indicate that investors see value in the high-quality, low-price offerings of Chinese automakers.

The buzziest EV IPO of the year is a Chinese automaker

Venture capital has been hit hard by souring macroeconomic conditions over the past few years and it’s not yet clear how the market downturn affected VC fund performance. But recent…

VC fund performance is down sharply — but it may have already hit its lowest point

The person who claims to have 49 million Dell customer records told TechCrunch that he brute-forced an online company portal and scraped customer data, including physical addresses, directly from Dell’s…

Threat actor says he scraped 49M Dell customer addresses before the company found out

The social network has announced an updated version of its app that lets you offer feedback about its algorithmic feed so you can better customize it.

Bluesky now lets you personalize main Discover feed using new controls

Microsoft will launch its own mobile game store in July, the company announced at the Bloomberg Technology Summit on Thursday. Xbox president Sarah Bond shared that the company plans to…

Microsoft is launching its mobile game store in July

Smart ring maker Oura is launching two new features focused on heart health, the company announced on Friday. The first claims to help users get an idea of their cardiovascular…

Oura launches two new heart health features

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI considers allowing AI porn

Garena is quietly developing new India-themed games even though Free Fire, its biggest title, has still not made a comeback to the country.

Garena is quietly making India-themed games even as Free Fire’s relaunch remains doubtful

The U.S.’ NHTSA has opened a fourth investigation into the Fisker Ocean SUV, spurred by multiple claims of “inadvertent Automatic Emergency Braking.”

Fisker Ocean faces fourth federal safety probe