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Businesses The Almighty Buck

Amazon To Buy Whole Foods Market For $13.7 Billion (usatoday.com) 198

Amazon said Friday it would buy Whole Foods Market for $13.7 billion as the giant internet retailer makes a deeper push into the grocery space. From a report: Amazon has dabbled in brick-and-mortar operations, experimenting with a bookstore that opened in New York last month and plans to open "no-checkout" convenience stores. But the Whole Foods acquisition represents a dramatic departure from its early business model founded on online retailing and related technology. Grocery retail is a notoriously thin-profit-margin business. And Whole Foods -- often derided as "Whole Paycheck" -- has struggled in recent years to keep up with emerging competitors that are expanding nationwide with cheaper items. Traditional grocery stores have also widened their organic food selections in hopes of retaining customers who are increasingly looking to eat healthily.
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Amazon To Buy Whole Foods Market For $13.7 Billion

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  • by K. S. Kyosuke ( 729550 ) on Friday June 16, 2017 @10:05AM (#54632641)
    If only there was a way to prevent customers from checking prices online...
    • Re: (Score:2, Insightful)

      by Anonymous Coward

      You've obviously never been to a Whole Foods :)

      Seriously though, I'm mad at Whole Foods for buying out and shuttering all of the other chains of "Health Food" stores.

      They're really stores that just sell high quality foods that are more pricy than the usual factory farm product. And some feel-good hippy branding to go with it. Oh, they also have really fucking good deli foods.

      Point is Whole Foods is a bunch of dicks, run by a bunch of dicks.. We'll see if Amazon does them better.

      • Point is Whole Foods is a bunch of dicks, run by a bunch of dicks.

        All the cute lesbian clerks are lady boys?!

      • "You've obviously never been to a Whole Foods :)"

        Well, considering that the nearest one is like 1000 kilometers away from me (about 10000 football field lengths for you US types), the answer is indeed "obviously not".

        Point is Whole Foods is a bunch of dicks, run by a bunch of dicks...

        ...for a bunch of dicks? On the other hand, at least they shall not perish this way.

      • by jellomizer ( 103300 ) on Friday June 16, 2017 @10:53AM (#54633053)

        They are also cashing in on people who equate:
        All Natural = Healthy
        GMO = Poison
        Preservatives = Part of big food.

        Now the food quality is probably rather good, because they are not competing on price, so they can pick the quality products. And if it doesn't have all this "bad stuff" listed above then the food is probably fresh, as it will probably spoil soon.

        • by Kohath ( 38547 )

          All Natural = Healthy
          GMO = Poison

          Fake news

        • by Rick Schumann ( 4662797 ) on Friday June 16, 2017 @12:38PM (#54633879) Journal
          It's not the GMO part of GMO that's the problem, it's the fact that it's been genetically modified to be resistant to herbicide, and the fact that crops are drenched in glyphosate herbicide just before harvest in a process called 'dessication', which leaves detectable amounts of glyphosate residue in those crops, which ends up in your body, fucking up your metabolic processes that's the problem.
          • by Quirkz ( 1206400 )

            Wait, why would they drench a plant in herbicide just before harvesting? You use the herbicide to kill off the weeds while the plant is growing, to reduce competition for resources. I can't think of a reason you'd need to really, really kill new weeds just before collecting the food from plants that are already fully grown and ripened.

        • by vidnet ( 580068 )

          If people don't want modern preservatives, BPA, MSG, GMO, or whatever today's vilified buzzword is, I'm generally ok with it.

          What peeves me is when the primary difference is labelling and presentation. It's increasingly a problem everywhere, but Whole Foods does it more than anyone:

          * Sugar => Evaporated Cane Juice
          * Contains 10% whole grains => Made with 100% Whole Wheat (and other ingredients)
          * Raisins => Gluten-free, Vegan, Kosher certified dried grapes
          * High Fructose Corn Syrup => High Fructos

      • by hey! ( 33014 ) on Friday June 16, 2017 @11:20AM (#54633237) Homepage Journal

        I think there's a bit more to the Whole Foods business model. The high prices keep traffic low.

        There's a local chain here called "Market Basket". It's a family run chain that was in the news a few years back when the employees went on strike to defend the ousted CEO. The customer service is excellent, the meat and produce good, and the prices are the lowest of any of the local chains. The problem is that it's always *packed* with shoppers. The aisles are congested, and sometimes I can't even find parking. Every day is Apocalypse preparation day there. At times I've had to wait twenty minutes for deli service, even though they've got five guys behind the counter working like sled dogs.

        So if I need one or two things in a hurry I can't at the convenience store, I'll breeze into my local Whole Foods. I'll park withing fifty feet of the front door, walk right up to the meat counter and then right out to checkout, and there's seldom anyone in front of me. An expedition that would take over half an hour at Market Basket is done and dusted in five minutes at Whole Foods, and I pay for the privilege.

        By any objective standard, Market Basket is a more sensible place to buy groceries; Consumer Reports ranks it second out of sixty American chains in their most recent evaluation; Whole Foods comes in #27, largely because of their obscene prices. But it's almost like they're in different businesses because they provide different customer experiences.

        • by ranton ( 36917 )

          The problem is that it's always *packed* with shoppers. The aisles are congested, and sometimes I can't even find parking. Every day is Apocalypse preparation day there. At times I've had to wait twenty minutes for deli service

          Isn't all of that solved by just opening more locations?

          • I would expect the margins are thin enough that they need an extreme amount of sales per store to keep things running.
            • You can reduce your margins to nothing and if you double space end up with a paper even longer than one with large margins.
          • by hey! ( 33014 )

            It's the old accounting koan: when a fixed costs variable and variable costs fixed?

            When they're unit costs. The way you get prices down is to amortize your fixed costs like store rent over as many shoppers as possible. Even the aisles at MB are noticeably more narrow than typical.

        • I think there's a bit more to the Whole Foods business model. The high prices keep traffic low.

          Where do you live that is so hipster free? I live within walking distance of a Whole Foods and they have about 15 registers open all day and the checkout line alone takes 10+ minutes. I've been to one in DC that is worse, that has over 25 registers and the line to checkout goes to the back of the store. That DC Whole Foods uses the Fry's Electronics model for its express checkout. It has about 10 express checkout registers with a single line that goes pretty quickly, but is insanely long.

    • by goombah99 ( 560566 ) on Friday June 16, 2017 @10:35AM (#54632887)

      a kombucha dash button. Thank god! Someday we'll all wonder what life was like before that.

      You evidently have never shopped Whole Paycheck if you think profit margins are thin. It's ripe for home delivery since the people who shop there have more money than time what with all the Hot-room Yoga and Reki to get done. But home delivery is a serious logistic problem, at least if you plan to make money at it and not just burn your Angel investor's stash before auctioning off your sock puppet mascot. Amazon has that figured out. And it works both directions. As long as you are going the the Store, why not pick up your amazon order there a day earlier. Finally if you are going to deliver things by drone they need to be small, lightweight, and expensive as a $22/oz lavender oil douche.

      • Home delivery is not expensive.
        Once you start to count all of the costs of driving, even before you count your time collecting stuff, or the cost of running a car, it can rapidly become economic.
        As one example, I pay (in the UK) $3-8 (depending on time of week) to get deliveries of over $60.
        This is available from several supermarkets.

        Of course, because I can't drive for health reasons, it becomes _WAY_ cheaper than public transport.

        • by ShanghaiBill ( 739463 ) on Friday June 16, 2017 @11:26AM (#54633287)

          Home delivery is not expensive.

          Once SDCs are available, home delivery will likely be cheaper than going shopping. Amazon is getting ready for the future. They can sacrifice profit in the short run, so they have the infrastructure in place to profit in the long run.

          Since they have an astronomically high P/E of over 500, their investors seem to agree that this is a smart strategy.

          • Self-driving cars don't solve grocery delivery, you need human-like robots for that. The robot has to select the right set of groceries, unload them from the truck, navigate complex apartment walkways, identify the right unit number (which can be very tricky -- humans keep messing that up in my complex because there's two of each unit number in the same complex with a different address), ring the bell if there is one or knock on the door otherwise, wait an appropriate amount of time, understand the customer

      • by swb ( 14022 )

        You evidently have never shopped Whole Paycheck if you think profit margins are thin.

        There are several co-op type stores in my area, I don't usually shop them except when they have something I want specifically (like duck eggs). They are small footprint stores with limited skus and selection.

        When Whole Foods opened a new store in a high-end shopping area nearby, I went in to see what all the fuss was about. What a disappointment -- I don't think they had many more skus than the local co-ops (and no duck eggs!). The product package sizes were also tiny, half size of normal store equivalen

      • by PPH ( 736903 )

        It's ripe for home delivery

        I really wonder about that. In my town, people go to Whole Foods as an experience. To be seen by other hip people, buying trendy food.

        Never mind that the same people stop by Costco afterwards to buy food staples by the caseload.

        • I tend t agree, some WF even have massage therapists to give a chair massage before the so so difficult task of picking up some groceries for cook to make this evening. And without the massage available, I imagine they would have sent the maid or butler to do the shopping. It is so oppressive to be filthy rich, how do they do it?

          • Sometimes you just have to go buy your own groceries, because "the help" don't always have the refined sophistication it takes to pick out only the finest fruits and cuts of meat.
    • Comment removed based on user account deletion
    • Oh damn....thanks for pointing out that patent they approved. I didn't think of that. That's twisted. https://www.theverge.com/2017/... [theverge.com]
    • The high prices are part of the appeal. Keeps the riff-raff out so you don't have to spend time in line with peasants.
  • Interesting strategy (Score:5, Interesting)

    by sjbe ( 173966 ) on Friday June 16, 2017 @10:08AM (#54632651)

    I kind of figured Amazon would try to get into the grocery business in a big way but this is not the strategyI would have expected. It's an interesting approach from a business perspective. Whole Foods is struggling with cost and pricing but has a good brand and Amazon is amazing at the back end stuff. Might work brilliantly if they do it right. Might be a catastrophe. It's certainly well outside Amazon's wheelhouse to get into traditional retail in such a big way but it does give them immediate access to a high quality group of supplier relationships in groceries.

    • by Albanach ( 527650 ) on Friday June 16, 2017 @10:21AM (#54632775) Homepage

      Whole Foods are also a national chain which might have been tempting. To get nationwide coverage in high income zip codes would otherwise have required multiple purchases.

      That said, their stores are often pretty small compared to the bigger supermarkets which isn't great if you want to use them as local warehouses for Amazon Fresh, and they're also located in prime (read high-cost) locations, also unnecessary.

      • I'd assume Amazon is going to be using WholeFoods as part of their AmazonFresh grocery delivery service, which is by definition an upscale service, so well matched to the prime/high-cost locations and WholeFoods demographic.

        • [...] which is by definition an upscale service [...]

          Safeway has home deliveries. No one would call Safeway upscale.

          • by jedidiah ( 1196 )

            Whole Foods really doesn't bring anything to the table that can't be done by any competent general grocery chain. They aren't even the best when it comes to the snooty foodie crowd. Whole Wallet just found a nice consumer niche full of suckers.

            • While I don't shop there... or really get Whole Foods, it seems like a very smart strategy by Amazon. My guess is that it fits into their very complex logistics puzzle somehow where they see drivers being able to do more, and using the Whole Foods brand to help both sides. Key factors are their nationwide coverage and high income areas, although the latter might not be that important in the end.
          • What I meant is that grocery delivery (regardless of store) is an upscale service since one way or another you're going to pay extra for delivery. Most folk are struggling to make ends meet.

          • by tlhIngan ( 30335 )

            Safeway has home deliveries. No one would call Safeway upscale.

            They are upscale compared to other more bargain supermarkets like Walmart and other discount supermarkets.

            Anyhow, they're going after the Amazon demographic - the millennials who have never stepped foot in a supermarket and shop almost exclusively at Amazon. Everyone else who shops at supermarkets know they practically all have pickup or delivery services nowadays and uses them on occasion.

    • by hsmith ( 818216 ) on Friday June 16, 2017 @10:22AM (#54632781)
      Whole Foods is in a lot of markets especially higher end ones. It allows Prime Pantry to expand fast. WF has also been struggling as of late. It has been re-evaluating its "buy local" because it is getting squeezed by Wegmans. So an easy buy from that angle.
    • by nine-times ( 778537 ) <nine.times@gmail.com> on Friday June 16, 2017 @10:30AM (#54632855) Homepage

      It's not just that Amazon is good at the back end stuff like managing a supply chain. They've also been working on that "Amazon Go" thing where you have a store without cashiers or checkout lines. If they can bring a lot of automation and efficiency to Whole Foods, they could bring prices down quite a lot, which has been one of the principle complaints about Whole Foods.

      Of course, that wouldn't necessarily be good for the people who work at Whole Foods...

      • by Nidi62 ( 1525137 )

        They've also been working on that "Amazon Go" thing where you have a store without cashiers or checkout lines. If they can bring a lot of automation and efficiency to Whole Foods, they could bring prices down quite a lot, which has been one of the principle complaints about Whole Foods.

        If they get rid of workers and automate everything, they will have to come up with an algorithm to "accidentally" over weigh meat.

  • by HumanWiki ( 4493803 ) on Friday June 16, 2017 @10:10AM (#54632667)

    "Sure. That will be 47.25"

    Wow, that's a great price. Make it 4!.

  • by TWX ( 665546 ) on Friday June 16, 2017 @10:10AM (#54632673)

    It'll be interesting to see what comes of this. At one point grocery stores used to be somewhat all-purpose in suburban areas, sometimes they'd have a decent sit-down restaurant, a section with more housewares, sometimes clothing or a limited amount of furniture, etc. We even had a chain around here that folded-into Smiths, then Fred Meyer, and ultimately Kroger that had a garden section similar to what you'd find at a Home Depot or Lowes. At some point most of the stores did-away with these extra features except for a few that retained "Marketplace" tacked-on after the name of the store, but even those usually limited themselves to a little bit of interior decor and some housewares like you'd find at a Bed Bath and Beyond. Everyone basically pushed to the bottom, basically going to mostly food.

    Now that trend seems to be reversing. Local grocery stores are even opening wine bars inside, plus restaurants and the like. The amount of non-food stuff hasn't grown yet but I'm curious if it will, if grocers expect people to get tired of making multiple stops. With Target and Walmart having increased the size of their grocery departments this sort of expansion within grocery stores might be a way of fighting-back against Target and Walmart.

    It'll be curious if Amazon uses the grocery stores as a means to receive Amazon purchases quickly without having to have a Prime membership; if ship-to-store for next-day pickup on things that normally would require several days becomes a thing. That might be one of the ways to appeal to customers that might be able to afford Whole Foods pricing.

    • by Kohath ( 38547 )

      It'll be curious if Amazon uses the grocery stores as a means to receive Amazon purchases quickly without having to have a Prime membership

      Not likely. Amazon really wants you to get a Prime membership.

    • Amazon would push prime more with this... somehow. Costco/Sams Club model?
      • by TWX ( 665546 )

        At least in Costco's case, their membership price is what's used to pay operating costs. It's the sales of merchandise that produce profit, but because the operating costs are covered, it doesn't take a lot of markup over cost to make that profit. In exchange it creates very loyal customers, so at least for now they're smart to not try to raise prices and upset the apple-cart.

        Amazon's pricing is not based on that kind of model, as Prime does not account for enough revenue to pay for their operations.

        • That's not an apples-to-apples comparison, however. Would Prime cover operations if everyone was required to have it to shop at Amazon? Because that's the Costco model.

          • by TWX ( 665546 )

            True, but in exchange I suspect more people would expect even better prices on things.

  • When someone mentioned this in a comment on a different story, I thought this was a joke. OTOH, I don't shop at Whole Foods. I just bend over and get screwed at Safeway instead.
    • Safeway: Your club card saved you 25%.

      Me: Dammit. I need to save at least 40% to know I've played their stupid game well enough to get a fair price.

    • Is Safeway the hook up spot for closeted homosexuals? Why can't you just have anonymous sex in truck stop bathrooms like the old days?
  • by Joe_Dragon ( 2206452 ) on Friday June 16, 2017 @10:18AM (#54632741)

    Amazon's no checkout will be stopped by liquor laws unless they have an person on staff to check id's also city's / states may try to pass laws like the ones that say you can't pump your own gas just to keep people working.

    • by hey! ( 33014 )

      That's easy to deal with. You must rope off a separate "liquor store" inside the larger store. People who are buying liquor have to check out there.

    • I've often wondered if you could get around those laws by creating a co-operative and having your customers be part owners and employees of the co-op. Basically create a gas station where in order to purchase from it you are required to be a member (owner) and employee which permits you to pump your own gas.

      I'm not sure if the powers that be would like this blatant end-around of their shitty laws or be enthralled at the communal hippie co-op that's replacing evil capitalist enterprises. I suspect that th
    • Comment removed based on user account deletion
    • Shop in places that already have that with automated checkout. You can go register your credit card with them and it then asked if you are that person if you checkout with booze. Been in other places where it lights up and a person comes around to verify.
      Plenty of solutions already in place for that.
  • Unions lose again (Score:5, Interesting)

    by Kohath ( 38547 ) on Friday June 16, 2017 @10:56AM (#54633083)

    One of the last big union strongholds was grocery, with Kroger and Safeway/Albertsons employees being unionized. They've been facing stiff competition from non-union Walmart, Trader Joe's, Costco, and Target and some new non-union entrants like Aldi.

    Now with Amazon 's big push into the grocery business, unions are setup for even bigger losses.

    • Aldi a "new entrant?" They have been around forever, and actually own Trader Joe's.
    • One of the last big union strongholds was grocery, with Kroger and Safeway/Albertsons employees being unionized. They've been facing stiff competition from non-union Walmart, Trader Joe's, Costco, and Target and some new non-union entrants like Aldi.

      Now with Amazon 's big push into the grocery business, unions are setup for even bigger losses.

      I tell you, it's awful. If only there were a way that those employees could own part of the company for which they work - like, literally buy a piece of the company. Then they could have even more influence over the company than a union has. They could even buy and sell pieces of their company and others on an open market.

      Sounds crazy.

  • to avoid Whole Foods

    I never liked the store anyway - too posh and the people attracted by this. There is now one in the city I live for half a year or so, I never went there.

    Not a Health-Food store, but Trader Joe beats it by miles.

  • Right now Whole Foods pays their employees a reasonable amount (as I understand), provides benefits and employee discounts. Good things, even if their prices are rather high.

    I think Amazon is going to ruin Whole Foods as a company. The MBAs will squeeze out the soul along with more cash. Amazon will do the same thing that they do to their own employees: work them into the ground.
    Nothing new there... I'll keep shopping at Trader Joe's, thanks.

    • Amazon will do the same thing that they do to their own employees: work them into the ground.

      From other comments in this thread, it sounds like people are expecting the opposite: they won't have to do any work at all! Because robots do that now.

  • Whole Foods was never a majority of our grocery budget, but we've always gone there fairly regularly, until now. Buh-bye, Whole Foods! It's too bad. They had some really good stuff that we couldn't get other places.
  • by Huge_UID ( 1089143 ) on Friday June 16, 2017 @02:36PM (#54634895)
    Bezos: "Alexa, buy me something from Whole Foods" Alexa: "Buying Whole Foods" Bezos: Shit Jeff Lewis @ChicagoPhotoSho https://twitter.com/ChicagoPho... [twitter.com]

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