How Amazon Will Take Over the Grocery Industry
Amazon announced on Friday that it will acquire Whole Foods Market for $ 13.7 billion, a move that will give the tech giant a network of 456 physical stores. But even beyond giving Amazon an established real-world presence, it’s not hard to see how the move will help the company further its goals of taking over the grocery industry.
Firstly: distribution. As Slate’s Daniel Gross points out, Amazon just purchased a large network of distribution nodes in prime, upper-income locations. Amazon could obviously use its newly acquired Whole Foods locations as physical outlets for users to pick up or drop off orders made through its web platform, even for products that stretch beyond groceries. That’s a good theory, but — despite the headline of that article — it’s probably not Amazon’s “endgame.” While it’s hard to say anything for sure at this point, I’d venture that Amazon’s ultimate goal is much, much larger than that.
Take into account Amazon Go, the company’s utopian vision for a grocery store of the future — walk in, pick up the items that you need, and simply walk out without needing to stand in line. With this in mind, it’s easy to see that Amazon just purchased a network of physical infrastructure to apply its Amazon Go technology. It doesn’t have to build brick-and-mortar stores, it can simply apply its system to the existing outlets — many of which are placed, as previously mentioned, in excellent retail locations.
But to see where Amazon could take this, we have to look at Amazon Web Services. The massive cloud-computing platform is the company’s most profitable business, as they collect billions in revenue by way of licensing the cloud technology to other companies and organizations — among them Netflix, Reddit, Dropbox and Pinterest. With this business model in context, it’s not too much of a stretch to see where Amazon could be going with its Whole Foods purchase.
A Recipe for Market Domination
All the company has to do is outfit the newly acquired Whole Foods locations with its Amazon Go technology. This — along with Amazon’s ability to bring down prices aggressively — could revitalize the organic grocery store chain, which has been flailing in the wake of losing a huge swath of its customer base. From here, after proving the concept, all the company has to do is wait as consumers gain an expectation of what the future of retail shopping should look like.
After that, Amazon can just license its patented technology to just about everyone, like it does with AWS — particularly local grocery chains and retail stores which lack the resources to outfit their stores with similar tech. And it’s not just groceries: applied on a larger scale, similar technology could be used across the entire retail industry. That may be a lofty and startlingly ambitious goal, but it’s still within the realm of reality — and it seems all the more likely with the Whole Foods acquisition taken into account. Of course, this is just a theory, so we’ll have to wait and see if Amazon actually takes that step toward retail — and perhaps world — domination.
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