Wednesday, June 21, 2017

Amazon Buys Whole Foods {Part II}

So here's part of my take on the Amazon-Whole Foods merger and I'll flesh out my initial thoughts from Friday on this.

The retail experience in most places is about to change dramatically.  To understand what Amazon is going to bring to the table with Whole Foods watch this video:


Think about the possibility, soon likely coming to the mass market, of being able to go into a grocery with technology enabling you to put everything in your basket or cart and then just head out the door.  Also remember most shoppers are creatures of habit.  If you buy XYZ orange juice then the chances are you will keep buying the same brand.  What if you just tell Whole Foods to send you XYZ orange juice once a week and it magically shows up on your doorstep Saturday morning.  Better, what if a bar code on your orange juice reads when it is nearly empty and automatically replenishes the order for you.  Or your refrigerator tells Amazon that you are low on OJ as well as milk.  This is not some sort of sic-fi scenario.  The technology to do all of this exists today, albeit in its infancy.  Add five years on to the mix and couple that with the rapid advancement of drones and you can see where this is potentially going.  

Don't just equate all of this to food.  Why won't you be able to go into a store, try on a dress or shirt and have it sent to you at prices competing with somebody like Amazon.  If Macy's doesn't need to keep all sorts of inventory on hand what are the savings in terms of inventory and personnel?  They have to be huge.   Also if Macy's knows you like a certain kind of dress or a perfume, why wouldn't they be able to let you know when something just like it is available or on sale?  

See I don't think shopping is dead.  I was at the Oak Brook mall outside of Chicago this weekend and it was mobbed.  People still like to get out and they still like the shopping experience if that experience is worth it to them.  But retailers are going to have to find a way to compete, especially on price.  I see no reason why they can't mimic some of Amazon's tactics to help them compete.  But to compete retail needs to change dramatically and one of the things that's going to happen is that there are going to be a lot less folks working in retail in the coming years.

We'll get to that next week.  I'm leaving for a wedding tomorrow so we'll post again either Monday or Tuesday next week.

*Amazon, Macy's and Whole Foods are components of various ETFs we own in client and personal accounts.