From Amazon's perspective, Whole Foods is a fairly low risk acquisition. WF is a going concern, not growing like crazy, but operating on a profitable basis. They don't need cash or a bail out and prima facia don't need management attention. Given the delta in revenue and profit between the two companies, they won't materially contribute to Amazon's top or bottom lines. Hence, this is not a deal for its own sake. It's strategic to Amazon. Until Amazon makes a formal and compelling statement (not a smoke screen), we'll have to infer what we can and speculate.
Amazon has shown a clear intention to pursue the grocery business. Local fresh delivery and operating retail stores that don't have cashiers or cash registers of any sort implies that they want to change the way people acquire groceries, in terms of both delivery and in-store. From a delivery and distribution standpoint, I really don't think Amazon has much to learn from WF. Amazon is likely the technology leader in that space.
What all of this means to me is that Amazon wants to roll out their cash register-free shopping experience beyond the proof of concept and into a larger scale. And they want to do that in a way that the results can be considered experimentally valid.
By buying a going concern, at the right size and scale, and then only changing one variable, they have a pretty good, experimentally valid method of seeing whether and to what extent the cash register-free shopping approach can work. Some example questions that may be answered:
- How is foot traffic affected? Do they get more people into the stores because there is guaranteed to be no line at the cash register?
- How is customer service affected? Can they redeploy cashiers to the aisles to answer customer questions? Perhaps up-sell customers to a higher average sale?
- How is profitability affected?
- What is the cost of maintaining the check out system itself?
There are many more things they can learn from this. It's a small investment that should hold it's value and provide a petri dish that yields experimentally valid results. Once they have those results, they'll be confident in their decision whether to invest in a global roll out.