Amazon to purchase Whole Foods for $13.7Billion

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SamSpade
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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby SamSpade » June 18th, 2017, 10:43 pm

From CNN Money:
Walmart gets 53% of its sales from food, groceries and things like household cleaning products, according to GlobalData Retail. Target gets a third of its sales from those categories.

Walmart I could believe due to changes in market demand for some things they sell (apparel, housewares, physical audio, video, books) but could a third of Target sales now be in food and paper products, cleaners, etc.?

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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby mbz321 » June 18th, 2017, 11:06 pm

SamSpade wrote:From CNN Money:
Walmart gets 53% of its sales from food, groceries and things like household cleaning products, according to GlobalData Retail. Target gets a third of its sales from those categories.

Walmart I could believe due to changes in market demand for some things they sell (apparel, housewares, physical audio, video, books) but could a third of Target sales now be in food and paper products, cleaners, etc.?



I believe it, given how poorly the other departments are merchandised in any given Target. They seem to have lost their apparel and home goods mojo over the the years pretty much leaves them with those departments as their main categories.

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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby storewanderer » June 19th, 2017, 12:17 am

Target's clothing and home goods departments look terrible (frankly, I think Kmart's look better but are priced higher). Target in the 90's and 00's was "trend forward" and did a really good job getting people to buy from those departments, but even back then, quality was suspect to me. If you look at the quality of what Target is offering in those departments it is also generally not good (most of it seems worse than Wal Mart). Another category where Target seems to be pretty much garbage is the shoe category.

I think 1/3 of Target's sales coming from food/drug related categories sounds about right. I am actually surprised the amount isn't a little bit higher. I would expect the drug category has a pretty good showing though, in that total.

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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby buckguy » June 19th, 2017, 11:24 am

Amazon started out selling books because it was a way to reach relatively affluent customers with a commodity. Book selling was a mature business, but they entered it anyway and competed on selection and price. They've entered the food business in an analogous way---its a mature business but they've picked a retailer with an affluent clientele. They also got themselves a national distribution network and access to jobbers who also sell to conventional chains. Given that conventional chains have made inroads on their turf, WF is looking for trouble if it follows the usual business school model of gutting labor and cutting quality. Going into conventional grocery areas would mean taking on lower margin items and diluting the brand. It will be interesting to see what Bezos does. When he took over the Washington Post (as Bezos rather than as Amazon), he surprised people by investing in the news room, and keeping the waxworks of old mostly conservative guys that passes for an op-ed page. He briefly increased local coverage which has never been very good (no one joins the Post to cover suburban council meetings--just ask Bob Woodward who came to the Post doing just that), but mostly has livened up the national political coverage which had been trading on leaks from GOP Hill staffers and right of center position paper mills. The website has long been an alsoran and hasn't gotten much better. So...WF may change less than anyone expects. The customers and perhaps the infrastructure and the ability to link to Amazon's infrastructure which may lead to changes more incremental than disruptive--more like the Washington Post than the original Amazon. WF's strength and profit center is perishables whose delivery can be enhanced but frankly involve items that most people want to buy themselves in a process that also drives impulse purchases. Bezos may have some surprises but he's constrained here by what's worked and by what could dilute the "brand equity".

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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby storewanderer » June 19th, 2017, 8:56 pm

I think it will be a foundation. Nothing more. Amazon would be stupid to dumb down the Whole Foods brand and I am sure they know better. They can do something dumbed down under a different brand.

It will probably result in some very fundamental changes to how Whole Foods does things and its culture, but I don't think it will have the shock over retail that the stock market gave to various retail chains the day this transaction was announced.

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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby klkla » June 20th, 2017, 5:09 pm

One of the advantages Whole Foods has is that they are spread out across the country with stores in almost every affluent major city.

This would make the stores a great supply source for online ordering which of course is Amazon's main business.

I see this as being the biggest synergy in this deal.

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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby storewanderer » June 20th, 2017, 7:54 pm

Does the average Whole Foods really have space to be a warehouse for Amazon items? Is the rent at the typical Whole Foods location something that aligns with being a warehouse for Amazon orders? I don't know...

The Whole Foods here in Reno, despite being about 60k square feet, is literally bursting at the seams. They do not have large enough storage areas, enough refrigeration, enough space in receiving, a large enough parking lot... for the volume they do... I think most of the NorCal Whole Foods have this exact same "problem" (if that is your only problem then you sure don't have much to worry about).

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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby klkla » June 21st, 2017, 4:46 pm

storewanderer wrote:Does the average Whole Foods really have space to be a warehouse for Amazon items? Is the rent at the typical Whole Foods location something that aligns with being a warehouse for Amazon orders? I don't know...


The store itself would be a de facto warehouse for Amazon's delivery business. In other words their shoppers would just get merchandise off the shelf for deliveries. This would benefit Whole Foods by increasing volume at the stores and it would benefit Amazon because they would have three hundred stores to source product from without them having to build that infrastructure.

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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby pseudo3d » June 21st, 2017, 5:12 pm

storewanderer wrote:Does the average Whole Foods really have space to be a warehouse for Amazon items? Is the rent at the typical Whole Foods location something that aligns with being a warehouse for Amazon orders? I don't know...

The Whole Foods here in Reno, despite being about 60k square feet, is literally bursting at the seams. They do not have large enough storage areas, enough refrigeration, enough space in receiving, a large enough parking lot... for the volume they do... I think most of the NorCal Whole Foods have this exact same "problem" (if that is your only problem then you sure don't have much to worry about).


From what I've read, Amazon Fresh is operated from different facilities than main Amazon DCs.

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Re: Amazon to purchase Whole Foods for $13.7Billion

Postby storewanderer » June 21st, 2017, 9:08 pm

klkla wrote:
storewanderer wrote:Does the average Whole Foods really have space to be a warehouse for Amazon items? Is the rent at the typical Whole Foods location something that aligns with being a warehouse for Amazon orders? I don't know...


The store itself would be a de facto warehouse for Amazon's delivery business. In other words their shoppers would just get merchandise off the shelf for deliveries. This would benefit Whole Foods by increasing volume at the stores and it would benefit Amazon because they would have three hundred stores to source product from without them having to build that infrastructure.


So essentially the same concept as Safeway.com?

Whole Foods already has a "concierge" service that has a delivery fee and a 10% upcharge for a personal shopper to go shop for you and then you pick your items up at the store. Orders are either phoned in, emailed in, or faxed in. They have contracts with some tourist entities up at Lake Tahoe where groundskeepers or some other staff of the said entities drive down to Reno to pick up the orders which Whole Foods fulfills from the Reno Store. The system is pretty low tech, the store literally just scans everything into the cash register then keys the credit card number of the user for the bill. It is a little bit of a challenge as tourists want items like Oreos or Heinz Ketchup and Whole Foods does not have those and then fulfills the order with Newman O's or some "other" Ketchup. Some customers are still funny about brand and it will be interesting to see how Amazon goes about that. I think Amazon will need to figure out a way for customers to be able to order whatever food they want, and fulfill it locally, not just what Whole Foods wants to sell to the customer.


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