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Winners and losers in Amazon’s $13.7B purchase of Whole Foods (techcrunch.com)
33 points by smb06 120 days ago | hide | past | web | 49 comments | favorite



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.


I always viewed Whole Foods much more cynically. Their supposed high quality is more about marketing to gullible liberals than anything else. The fact that they sell homeopathy sets off my scammer alarms.


With regards to homeopathic remedies, I would argue find store that sells any health products that doesn't have at least a small shelf dedicated to homeopathic remedies. I agree with you that the basis for the homeopathic remedies is non-sense, but it also strikes me as a caveat emptor, to a certain point.

As for the other half, are you suggesting that only those of liberal politics would ever buy organic or fresh produce, or be taken in by the marketing of Whole Foods? The statement reads as a non-sequitur, and I'm not sure how it is relevant.

Whole Foods sells an image and a promise of organic, and I'm pretty sure they will meet the current US legal definition of organic for whatever they're selling. It's not a relevant factor for me when buying, but I wouldn't call people who do buy there "gullible", as I'm pretty sure Whole Foods is giving the customer exactly what they want.


I probably shouldn't have used liberals and derailed my thought with politics. I had more of a stereotype in my head that probably has less to do with politics, and more to do with having money, and a certain amount of guilt about money, and thinking you can use the money to ameliorate some of that guilt. This would be a very gullible stereotype to have as a customer and you could see how marketing would be tempted to go over the top making up new things to feel guilty about and new ways to spend money to feel less guilty about them.


I think it's much simpler than that. People that have the money to buy healthy food simply like to buy healthy food.

The food there is excellent. I'm not rich by any standard and I love shopping there because to me it is high quality. Go to a typical large grocery store deli, then go to Whole Foods deli, you can easily see which one is better.

I'm not sure where you came up with the "I feel guilty about the money I have so I'm going to spend it on foods that are healthy (or claim to be healthy, I'm not sure if you're making that connection or not)" construct. Seems like a reach.


Organic food has nothing to do with health. Organic refers to the type of fertilizers and pesticides used and is 100% a gimmick. Abandoning inorganic chemical fertilizers and pesticides would lead to mass starvation across the world. And in terms of the food quality, there is no evidence that it makes any meaningful difference.


Please, a lot of things like hormone and antibiotics fed vs non of that are not a gimmick, maybe just say you are reserved on the health benefits. Sure it's not specific to organic, but at least in Europe a big part of the specifications are meaningful.

I understand a certain lifestyle is annoying for some people and that a lot of bullshit is sold in organic stores (homeopathy, ...) and that not everything is healthy because it's "ancient and natural" but let's not confuse everything.


> Please, a lot of things like hormone and antibiotics fed vs non of that are not a gimmick, maybe just say you are reserved on the health benefits.

Worrying about hormones and antibiotics in meat and dairy while being concerned about health makes as much sense as worrying about the effects of filters in cigarettes while looking to avoid lung cancer. Animal products are unhealthy, and inhumane.


You can worry about the presence of these additives and drugs in plants and plant-based dishes that you eat. This is not even remotely connected to vegan / non-vegan products.


> You can worry about the presence of these additives and drugs in plants and plant-based dishes that you eat.

Do you understand the difference between plants and animals? Animal antibiotics and hormones are not applied to plants. Plants are not susceptible to diseases that can be transferred to humans. The pesticides that are sprayed on plants are entirely different chemicals. Plants have the least problems with heavy metal and toxin bioaccumulation because they are at the bottom of the food chain. The risks for contamination of animal and animal product foods are orders of magnitude greater than for plant based food. But all that ignores the fact that meat and dairy are inherently unhealthy for humans - they are carcinogenic and cause heart disease.


I know someone who, in the US, is allergic to non-organic milk but not organic milk. They can drink EU non-organic milk fine. Apparently this is due to the hormones fed to cattle in the US.


Being organic doesn't make food healthier. Whole Foods just seems to have paid attention to procuring good produce. For the premium they charge, they can afford to buy the best product.


> And in terms of the food quality, there is no evidence that it makes an iota of meaningful difference.

Some oranges are sweet, and make delicious orange juice. Some oranges are sour, and make sour orange juice. When I'm shopping for oranges, my first choice is locally-grown, then organic, then I might try whatever 'conventional' orange the store happens to carry. I find some stores to be more reliable for carrying decent oranges than others. I think Trader Joe's organic frozen orange juice is more reliable than the other frozen orange juices that I've tried.

tldr: IMO organic oranges are usually sweeter than non-organic; local > organic.


I'm not an expert in this field and am open minded about it if you have some evidence to share. I did a quick Google search and it looks like this is at the very least a disputed topic. Some research shows that there are some (albeit minimal) health benefits to organic food. Saying it is a gimmick seems wrong.

And I don't think anyone on the chain is arguing to abolish chemical fertilizers. We're talking about the health benefits of the food sold at Whole Foods, which may or may not be organic and/or contain certain additives.


The comment you responded to never said anything about organic food, they simply postulated that people shop at Whole Foods because they carry healthy food - which they do.

I used to live near a WF and shopped there semi-regularly. They definitely stock non-organic produce, and it's consistently of high quality. Likewise for their salad bar, bakery & hot meals.

It's not the only place in the world that stocks healthy food, but I can certainly see why people shop there.


I am making that connection. I don't think there's much difference between hawking homeopathic medicine and expensive "Veganic Sprouted Ancient Maize Flakes".


In Toronto, produce we buy at Whole Foods lasts longer once we get it home than any other market or supermarket, even Loblaws and our local market. Don't even get me started on Sobey's, fresh produce from Sobey's often spoils and goes into the green bin the next day.


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?


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.


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?


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.


>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?

No, you just need to trust the seller.

>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?

Just because somebody doesn't care to smell and tickle their melons (no pun intended) it doesn't mean that they have to go straight to canned food.

Most people don't check their fresh produce that much anyway, they just get some items off the shelve and that's that.


One of the reasons I can't seem to buy groceries online no matter how lazy I feel like being.


Your comment is basically saying you think the high standards and customer experience that Whole Foods has cultivated will stop under Amazon's leadership.

If that's the case, and there is sufficient demand, another "Whole Foods" will sprout and fill that market demand.


>If that's the case, and there is sufficient demand, another "Whole Foods" will sprout and fill that market demand.

Other possibilities:

a) there's no sufficient demand, so that's the new situation the few discerning customers have to deal with forever

b) there's demand, but it's no sufficient enough to support two such big chains, so at best smaller, scattered around the country competitors arise, with jacked-up prices to support the higher standards (since they are not WF scale)

c) there's sufficient demand, but the Amazon merger has given WF so much power that they can crush any challenger

d) there's sufficient demand, but for a new challenger to emerge, gain traction and cover even half of the area WF covers will take close to a decade

Real markets are not like some economic fairy tale...


What's WFM?


Whole Foods Market. WFM was also their stock ticker.


Consumers rarely lose out from more competition entering a market -- I don't see why this situation would be an exception.


how does an acquisition equate to more competition? Amazon opening its own grocery chain = more competition; that is not what this is.


That acquisition is Amazon entering the brick and mortar grocery market which is new for Amazon.


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


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


How about Apple purchases Porsche and Netflix. That will make more sense.


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.


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.


> 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.


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...


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.


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.


> Whole Foods most important asset is their reputation, which IMO is way way way above Amazon's reputation.

Amazon is routinely ranked by consumer surveys as being among the best companies to buy from. It has been that way for a long time. The average US consumer overwhelmingly disagrees with you, its reputation as far as consumers are concerned is drastically better than Whole Foods.

https://www.forbes.com/sites/forbesinsights/2016/03/29/l-l-b...

https://www.forbes.com/sites/karstenstrauss/2016/03/29/ameri...

And this has been mostly unchanged for a decade, eg:

"For the ninth consecutive year, customers ranked Amazon #1 in customer satisfaction during the holiday shopping season according to the newly-released ForeSee Experience Index: US Retail Edition. For their study, customer experience analytics firm ForeSee collected more than 67,600 surveys between November 29, 2013, and December 17, 2013, asking consumers to rate their satisfaction with the top 100 retailers."

And

"2015 Best and Worst Retail Customer Experiences - Customer Rankings in Temkin Research Report" (Amazon is ranked #4; Whole Foods is #22)

https://www.thebalance.com/best-and-worst-customer-service-r...

And

2014 "Amazon Has the Best Consumer Perception of Any Brand"

http://www.adweek.com/brand-marketing/amazon-has-best-consum...

And

"Wal-Mart Stores Inc. is the largest retailer in the U.S. by sales, but when it comes to America’s favorites, Amazon.com Inc. dominates. In consultancy PwC’s annual global consumer survey, 52% of about 1,000 U.S. respondents listed Amazon, as one of their three favorite retailers in 2014, followed by 41% who named Wal-Mart, and 29% who listed Target"

http://www.marketwatch.com/story/amazon-tops-wal-mart-in-thi...

The references really don't stop going back a decade or more.


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.


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.


> 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.)


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.


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?



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


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.


Why would this be an illegal one? It has the potential to be a big force one day but nothing near that now and WF and grocery delivery both have lots of competition.




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