Amazon, that colossus of e-commerce, is becoming more like mega-store Walmart every day, even as Walmart tries valiantly to become more sophisticated in the ways of online sales. The electron becomes the brick, or vice versa. But with Friday's announcement that it was buying Whole Foods, Amazon has blown up the grocery business.
Twitter has been all over this. My colleagues here at Forbes.com have been all over this. The dailies, the weeklies, the alt-weeklies, the online sites have been all over this. A California congressman even wants a Federal restraint-of-trade investigation.
But they're missing the bigger stories while responding to the "Cleanup in Aisle 2."
First, Jana Partners bought a huge chunk of Whole Foods stock two months ago and promptly began needling founder John Mackey about the need to sell the company. Mackey responded by calling the hedge fund "greedy bastards." For all that, Jana comes out $300 million ahead in today's deal. Not a bad payday.
Second, this deal is not about Americans too lazy to go shopping. It's not about concentrations of power in the hands of fewer and fewer companies. It's not about "the future of commerce" for rich white people as Derek Thomas suggests in The Atlantic. Yes, "Amazon needs food and urban real estate, and Whole Foods needs help," but to extrapolate from that statement that Americans are too lazy to shop is more than a stretch; it defies logic. The notion that the "future of food will come in boxes" is absurd.
"Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy," Bezos said in a new release.
Here are some more of the pluses:
Amazon gets a national chain with over 450 stores, bang like that. as many grocery stores as Trader Joe's. Almost as many physical locations as Costco.
Those stores have very few direct ties to national food brands. Instead their strongest ties are to an army of loyal consumers.
Whole Foods essentially invented the organic food movement as we know it today, and it has long nurtured a reliable supply chain of farmers.
Costco--not Whole Foods--is still the nation's leading seller of organic food. But it only stocks about a third as many different items as the average American supermarket, so Costco is trying to develop a "treasure hunt" mentality (unexpected bargains in its warehouses stores to draw more customers visits). Walmart doesn't do that, Kroger doesn't do that. Whole Foods doesn't do that, either. But you never know, it might figure out some intersection of the Amazon treasure chest and the grocery store weekly special.
Meal kits? AmazonFresh is on it. Delivery from restaurants? Amazon is on it.
So what's the next frontier for Amazon? Well, what's left? Clothes, of course. Most families spend about twice as much for food as for clothing, but they still shell out hundreds of billions of dollars a year for shoes, shirts and shorts.
Who's big enough to have the know-how? Nike? Ralph Lauren? Old Navy? But what if Amazon decided to go in another direction, more like the Whole Foods profile, with a reputation for high quality? A company like Seattle-based Nordstrom, for example.
The company operates 125 up-scale stores selling clothing, footwear, jewelry and accessories under the Nordstrom banner, and another 200-plus as discounter Nordstrom Rack. It has over 70,000 employees, and pulls in almost $15 billion in annual revenue. The founding Nordstrom family still manages the company, but as recently as last week was discussing whether to take the company private.
Here's another reason that Nordstrom makes sense: on the day Amazon announced it was taking over Whole Foods, Walmart revealed it was buying the online clothing retailer Bonobos.
(Ironically, Nordstrom made a $16 million investment in Bonobos five years ago.)
Today, after Walmart's $300 million takeover of Bonobos, its stock dropped 6%. For its part, after the Whole Foods announcement Amazon's stock rose 2.8%.
So listen to what Jeff Bezos is asking, and pay attention to what Alexa is telling him.
