
Winners and losers in Amazon’s $13.7B purchase of Whole Foods - smb06
https://techcrunch.com/2017/06/16/winners-and-losers-in-amazons-13-7b-purchase-of-whole-foods/
======
clumsysmurf
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.

~~~
bambax
I buy most things online, yet I don't understand how you can buy "fresh"
anything online: don't you need to see it, test it, smell it?

I would never buy a melon that I can't smell first, or a fish without seeing
its eyes, or shrimps that I can't see how blue the head is, or cheese that I
can't press, etc.

How is this going to work? If you don't care about these things, isn't it
easier to buy canned goods or go to the restaurant?

What are the customers who want fresh but don't need to see / touch first?

~~~
michaelt
I don't know about the things you cook, but when I inspect things in the
grocery store I'm generally checking for (a) bruises/damage and (b) being past
its best.

Online grocery retailers have their employees (and stock management practices)
doing those checks for you.

A short-sighted company might think it was profitable to send bottom-of-the-
barrel leftovers to online customers - but in the long term there's much more
money to be made by sending a family $100 of good quality groceries every week
forever than sending them $100 of poor quality groceries once. So retailers
have every incentive to get the checks right.

With that said, if you're an expert cook, it's possible you're sensitive to
nuances the average person would overlook. In that case online shopping might
not meet all your needs.

~~~
bambax
Yes it's true it would be counter-productive to sell bad products.

However, when you shop in person you can choose, and so the best eye gets the
best products (or at least, so she thinks!)

And it's not only about quality: sometimes the same customer wants different
things. Regarding ripening for example, sometimes I want very ripe fruits to
use now, and sometimes I want greener ones because I intend to use them in a
few days. Same for cheese, what you want depends on when you intend to use it.
I don't want a Camembert hard as stone to eat tonight. I want one that's
"almost bad".

How do I tell all this to Amazon Fresh?

~~~
michaelt
In some cases, there are multiple products. For example, with things like
bananas and avocados retailers will offer a choice of 'ripen at home' and
'ready to eat'

Some retailers also let you provide instructions as free text. Obviously this
is more flexible, but prevents a computer from checking the worker's work.

------
SeeDave
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
The Apple/Netflix combination sounds a lot less far fetched than these other
examples (with the iTunes store being a pretty serious business).

------
vaishaksuresh
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
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
> 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
_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-p...](http://www.cnbc.com/2016/07/08/amazons-chinese-counterfeit-
problem-is-getting-worse.html)

~~~
wapz
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
What I quoted from you began with "As for reputation". Amazon's reputation
cannot be reduced to only customer service, which is what you are
highlighting. It's a straw man you have created.

A company can have a good reputation for customer service, while having a bad
reputation for other things.

In your example, the way Amazon achieves their customer service reputation is
reactionary. If you catch them selling you crap, then they will replace it or
refund your money. It's a fool's errand to allow them to play that game with
you.

The logical endgame to that business approach is the melamine poisoning in
China about a decade ago. "Oops, sorry we sold you milk and infant formula
adulterated with melamine. Sorry it killed your child. Here's your instant
100% refund with almost no questions asked".

As for revenue, once again you're creating a straw man. Of course R&D is "for
the future" and "not for the current". That's the literal definition. I said
revenue, not R&D.

As for my comment about "no matter the cost", let me try to restate it in more
detail, perhaps I didn't phrase it well:

Since its inception, Amazon's number one goal has been to grow revenue, from
year to year, as quickly as possible. That's their #1 business goal. They have
optimized for that revenue goal over other business goals. Revenue over
profit. Revenue over quality.

If selling a larger quantity of crap means their overall revenue increases,
then that's what they will do. That's what I meant by "no matter the cost". A
different way to say that would have been "Amazon Marketplace optimizes for
increased revenue at the cost of quality".

Marketplace is an easy way to increase revenue. No need for R&D. Just allow
all sorts of counterfeit crap to commingle in existing warehouse, and generate
revenue on fulfillment. The more crap you sell, the more you increase your
revenue.

The more Amazon increases its revenue, the more the stock market rewards it.
Wall Street values Amazon almost exclusively on revenue growth. Bezos has made
clear that his #1 goal is revenue, and Wall Street has embraced that metric.

Not coincidentally, supermarkets are very high revenue operations with very
low profit margins.

------
Shivetya
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.

------
orionblastar
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
> 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
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
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
[https://en.wikipedia.org/wiki/Diseconomies_of_scale](https://en.wikipedia.org/wiki/Diseconomies_of_scale)

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

~~~
adventured
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.

