Amazon Buys Whole Foods

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woof755
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Re: Amazon Buys Whole Foods

Post by woof755 » Fri Jun 16, 2017 11:37 pm

Saw this on twitter:

Bezos: Alexa, buy me something from Whole Foods.

Alexa: Buying Whole Foods.

Bezos: [(removed) --admin LadyGeek]
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Re: Amazon Buys Whole Foods

Post by FedGuy » Sat Jun 17, 2017 7:12 am

danaht wrote:The main problem with Whole Foods - is proximity.

That depends on where you live. From my place in Washington, DC, there are three Whole Foods within about a 25 minute walk, with a fourth on the way.

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Re: Amazon Buys Whole Foods

Post by sixtyforty » Sat Jun 17, 2017 9:01 am


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Re: Amazon Buys Whole Foods

Post by Valuethinker » Sun Jun 18, 2017 8:11 am

GoldenFinch wrote:Does this mean we will order groceries on line and they will show up at the door?


Not sure where this has gotten to in the USA, but in the UK this is 5%+ of all grocery shopping.

The evening sounds of middle class London neighbourhoods are of the slamming of hatches on Ocado vans ;-). (Ocado is a "pure play" on online groceries). Or Waitrose (a distinctly up market food retailer, part of the employee-owned John Lewis chain of department stores).

But this "works" because densities are much higher than the typical North American suburb, and the limited access points that US suburban developments use are much less common. So one truck can do a lot more deliveries in a given time period (traffic permitting).

Also my suspicion is fewer US householders are at home during the day-- another obstacle.

It's indispensable for 2 groups (at least):

- time poor professionals
- older people who are "shut in" and find it difficult to get to grocery stores (often parents of same, the children set up the online ordering with the standard orders)

ecommerce use in the UK as a percentage of retail sales is higher than in the USA (see geographic factors, above). So it is possible that we are showing "the way forward" for the US (and Amazon has just started to do online groceries here).

But it seems to me that given the structurally higher delivery costs in the USA (see above) you need to make more profit per order, and groceries are not, generally, a high profit per order business. Or you find some way to be more efficient (more through-put through the same logistics assets?).

It will be interesting to see how this plays out. Like Amazon's move into bricks-and-mortar retail, it's not an obvious move.

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Re: Amazon Buys Whole Foods

Post by stan1 » Sun Jun 18, 2017 9:17 am

In some cities Amazon already has its own fleet of vans and a separate group gig economy drivers using their own vehicles. Linking that to an established distribution center for fresh items (produce, meat, flowers). I'd guess they will also press hard on the state by state and city by city legalities of delivering alcohol to the door.

Seems to be a long term play by Amazon, especially if you add in an unmanned autonomous delivery vehicle (air and land based). Maybe a driverless delivery truck that goes along main roads with a fleet of drones taking packages from the truck to the doorstep. Innovation in delivery is coming from Amazon not UPS/FedEx right now.

What next? I'd say they buy Starbucks to set up lockers in the areas where the drone can't get into a multi-family dwelling. There's a lot of mid-high income multiple family dwellings within walking distance of a Starbucks, and Starbucks is already putting in drive throughs in suburban areas. Also shifts the burden for the "last 100 feet" of delivery from Amazon to the consumer saving a lot of money.

Hmm maybe I should buy some SBUX?

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Sun Jun 18, 2017 9:27 am

sixtyforty wrote:This is interesting... http://fortune.com/2017/06/16/amazon-bu ... ma-stocks/


Yes. Thank you.

I am not sure I understand the logic of "sell pharmaceuticals by buying a food retailer" completely, but I can sort of see how this would work (license pharma in WF outlets? Or just do pickup?).

Pharma comes closer to the ideal ecommerce product than ordinary food. High value per item, variegated (i.e. there are millions of books, and they are not perfect substitutes for one another; ditto music albums or TV shows and movies). Possibility (perhaps) of driving price down by scale economies of purchasing. Delivery cost less important.

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Sun Jun 18, 2017 9:29 am

stan1 wrote:In some cities Amazon already has its own fleet of vans and a separate group gig economy drivers using their own vehicles. Linking that to an established distribution center for fresh items (produce, meat, flowers). I'd guess they will also press hard on the state by state and city by city legalities of delivering alcohol to the door.

Seems to be a long term play by Amazon, especially if you add in an unmanned autonomous delivery vehicle (air and land based). Maybe a driverless delivery truck that goes along main roads with a fleet of drones taking packages from the truck to the doorstep. Innovation in delivery is coming from Amazon not UPS/FedEx right now.

What next? I'd say they buy Starbucks to set up lockers in the areas where the drone can't get into a multi-family dwelling. There's a lot of mid-high income multiple family dwellings within walking distance of a Starbucks, and Starbucks is already putting in drive throughs in suburban areas. Also shifts the burden for the "last 100 feet" of delivery from Amazon to the consumer saving a lot of money.

Hmm maybe I should buy some SBUX?


Good analysis but I assume you are kidding re Starbucks?

Why buy into coffee? An oversaturated (some might say over-caffeinated ;-)) market? Huge retail costs.

On the other hand:

http://www.theonion.com/article/starbuc ... ration-416

Maybe Bezos is up to even bigger game? Batman? ;-).

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Re: Amazon Buys Whole Foods

Post by CyclingDuo » Sun Jun 18, 2017 10:53 am

Call us skeptical, but we don't get this deal. Or at least we don't get the idea that it is going to be total disruption of the grocery industry as we know it like certain business media were pounding the table on Friday claiming.

Local grocery stores already deliver in our area and have for years (heck, they were doing that in NYC back in the 70's and 80's). Meh...
You can order Pastrami from Katz's deli in NYC and have it show up on your doorstep anywhere in the US. Meh...
You can order fresh cherry pie from Michigan and have it show up on your doorstep. Meh...
You can order cases of wine from most vineyards and have it show up on your doorstep. Meh...
You order a case of organic olive oil from Italy and have it appear on your doorstep in a few days. Meh...
Schwans has been delivering groceries in rural areas to your doorstep for decades. Meh...
HelloFresh (and many others) delivers all the ingredients needed to your doorstep to cook your meals. Meh...
Omaha Steaks delivers - and has for years - some excellent beef to your doorstep. Meh...
Grocery stores have used scanners at the checkout stand for years streamlining the process, and baggers will either take the bags to your car, or load them in if you pull up with your car. Meh...

Most of us prefer to put our hands on the fresh produce and choose our own. An avocado is not an avocado. An apple is not an apple. A steak is not a steak. You've got to see it, feel it and choose it for the best selection. Do we want some hourly wage earner loading up a box of groceries that they choose for us, and deliver?

What exactly about this deal is so exciting that the entire grocery industry is going to be disrupted and change the process of going to the store, the market, the Saturday Farmer's Market, the current way we buy and ingest our food?

Are we all seriously going to stay at home, order everything to have delivered to our doorstep while we are glued to a computer or phone screen?

Remaining skeptical about all the optimism and excitement. So far, the winners were the shareholders of Whole Foods. It's hard to imagine this is the end of Costco, Krogers, Wal-Mart, Safeway, insert your favorite grocery chain here: ________________ .

(Disclaimer: We do own shares of Wal-Mart and Amazon. We shop at Fareway, Hy-Vee, Safeway, Wal-Mart, Whole Foods, Trader Joes, Costco, local produce markets, local Farmer's markets, etc...)

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Re: Amazon Buys Whole Foods

Post by Tycoon » Sun Jun 18, 2017 11:14 am

CyclingDuo wrote:Call us skeptical, but we don't get this deal. Or at least we don't get the idea that it is going to be total disruption of the grocery industry as we know it like certain business media were pounding the table on Friday claiming.

Local grocery stores already deliver in our area and have for years (heck, they were doing that in NYC back in the 70's and 80's). Meh...
You can order Pastrami from Katz's deli in NYC and have it show up on your doorstep anywhere in the US. Meh...
You can order fresh cherry pie from Michigan and have it show up on your doorstep. Meh...
You can order cases of wine from most vineyards and have it show up on your doorstep. Meh...
You order a case of organic olive oil from Italy and have it appear on your doorstep in a few days. Meh...
Schwans has been delivering groceries in rural areas to your doorstep for decades. Meh...
HelloFresh (and many others) delivers all the ingredients needed to your doorstep to cook your meals. Meh...
Omaha Steaks delivers - and has for years - some excellent beef to your doorstep. Meh...
Grocery stores have used scanners at the checkout stand for years streamlining the process, and baggers will either take the bags to your car, or load them in if you pull up with your car. Meh...

Most of us prefer to put our hands on the fresh produce and choose our own. An avocado is not an avocado. An apple is not an apple. A steak is not a steak. You've got to see it, feel it and choose it for the best selection. Do we want some hourly wage earner loading up a box of groceries that they choose for us, and deliver?

What exactly about this deal is so exciting that the entire grocery industry is going to be disrupted and change the process of going to the store, the market, the Saturday Farmer's Market, the current way we buy and ingest our food?

Are we all seriously going to stay at home, order everything to have delivered to our doorstep while we are glued to a computer or phone screen?

Remaining skeptical about all the optimism and excitement. So far, the winners were the shareholders of Whole Foods. It's hard to imagine this is the end of Costco, Krogers, Wal-Mart, Safeway, insert your favorite grocery chain here: ________________ .

(Disclaimer: We do own shares of Wal-Mart and Amazon. We shop at Fareway, Hy-Vee, Safeway, Wal-Mart, Whole Foods, Trader Joes, Costco, local produce markets, local Farmer's markets, etc...)


An accurate assessment. :sharebeer
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Re: Amazon Buys Whole Foods

Post by randomguy » Sun Jun 18, 2017 12:21 pm

Tycoon wrote:
An accurate assessment. :sharebeer


No. One persons opinion. We can look back in 10 years and see how accurate it is. Details often matter. Why is Omaha steaks not the dominate provider of meat in the US? Is it because people want to buy steaks at their grocery store or is it because they don't want to pay 40/lb instead of 15/lb for the same meat? If they could get the steak for say 12/lb instead of 15/lb would you get 75% of the meat market? Who knows.
And remember that you don't need all the market. The questions is how many people like to molest their food versus how many want to save 2 hours/week to do fun things. Or heck maybe they can get you your fruit 2 days earlier so you end up with better produce on average. If only 20% of the consumers are in the last group, you can make a ton of money.


I assume amazon has some plan to continue to expand their reach and that whole foods fits in. If they are right and if they can execute are the unknown questions.

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Re: Amazon Buys Whole Foods

Post by Tycoon » Sun Jun 18, 2017 12:24 pm

randomguy wrote:
Tycoon wrote:
An accurate assessment. :sharebeer


No. One persons opinion. We can look back in 10 years and see how accurate it is. Details often matter. Why is Omaha steaks not the dominate provider of meat in the US? Is it because people want to buy steaks at their grocery store or is it because they don't want to pay 40/lb instead of 15/lb for the same meat? If they could get the steak for say 12/lb instead of 15/lb would you get 75% of the meat market? Who knows.
And remember that you don't need all the market. The questions is how many people like to molest their food versus how many want to save 2 hours/week to do fun things. Or heck maybe they can get you your fruit 2 days earlier so you end up with better produce on average. If only 20% of the consumers are in the last group, you can make a ton of money.


I assume amazon has some plan to continue to expand their reach and that whole foods fits in. If they are right and if they can execute are the unknown questions.


Time will indeed tell.
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Re: Amazon Buys Whole Foods

Post by kjvmartin » Sun Jun 18, 2017 12:55 pm

If you are into individual stocks, this seems like it could be a good buying opportunity for stocks like Costco and others. This seems to have been over sensationalized by media.

Be fearful when others are greedy, greedy when others are fearful.

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Re: Amazon Buys Whole Foods

Post by CyclingDuo » Sun Jun 18, 2017 1:15 pm

kjvmartin wrote:If you are into individual stocks, this seems like it could be a good buying opportunity for stocks like Costco and others. This seems to have been over sensationalized by media.

Be fearful when others are greedy, greedy when others are fearful.


That was exactly our modus operandi on Friday. Used the sell off in Wal-Mart to add more shares. The nearest Whole Foods is 26 miles from our house. We went there a few times when it opened years ago along with all the hooplala surrounding the opening of it. After a few shopping visits there, we found there was no "there" there compared to the other offerings throughout the area. At least nothing to make it a regular stop. Right back to our usual stomping grounds of where we buy our produce, meats, breads, cheeses, wines, cereal, etc...

Yes, ours is only one opinion. However, we felt it had to be said with all the dancing in the streets that was going on this past Friday. If this major disruption totally changes the entire grocery industry like we've never seen before, we shall see. Who actually requires 2 hours a week to shop for their food? Serious question, by the way. We roll our carts a lot faster than that!

We imagine Bezos and team have a well thought out plan, but our opinion is it will only serve a niche market. If you find us ordering an organic head of lettuce on Amazon.com and having it shipped to us as our only option 10 years from now, we'll eat our words - and the lettuce, of course. :mrgreen:

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Re: Amazon Buys Whole Foods

Post by abuss368 » Sun Jun 18, 2017 3:03 pm

This was incredible on Friday! Grocery companies are facing many headwinds. The stock of the acquirer usually goes down, however Amazon went up!
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Re: Amazon Buys Whole Foods

Post by randomguy » Sun Jun 18, 2017 4:28 pm

CyclingDuo wrote:Who actually requires 2 hours a week to shop for their food? Serious question, by the way. We roll our carts a lot faster than that!


I do. I go 2x/week as fruits tend to be good for 3-4 days max and the specials mean you tend to want to hit 2 stores/week. It takes 10-15 mins to get there, ~30-40 mins to shop, and 10-15 mins to get back home. That is ~2 hours/week. Adn rolling the cart faster doesn't really help. The issue is more transit time and checking out. Even with self checkout:) Sometimes you can save some driving time but the stores are not on routes I normally take. I have no clue what the exact average is but I would be shocked if many people do it under an hour/week.

It would be incredible to hear the business case that was made internally to buy whole foods (versus any other grocery or doing it themselves). We are left guessing on if they think the big value is in home delivery or getting people to the stores.

It should be noted that a store like trader joes has done pretty well and you don't get to pick much (any?) of your produce out. I don't know if anyone would have expected that when they launched.

THis is the big reason I don't buy stocks anymore. Too easy to either get caught up in a story OR translate personal perferences to global situations. Lynches buy what you know only works if what you know does well. I knew the mobile phone market well. But my investments in Rimm, Noikia, Palm, Ericison,... would have only paid off if I sold at the right time.

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Re: Amazon Buys Whole Foods

Post by NibbanaBanana » Sun Jun 18, 2017 6:27 pm

VictoriaF wrote:
GoldenFinch wrote:Does this mean we will order groceries on line and they will show up at the door?


That will be true for some, but I, for one, like to select my groceries. I choose the largest bunches of dandelion and dill, greenest of green apples, and cauliflower heads without blemishes. I note what is on sale, and revise my shopping list to get bargains. And it's a good place to meet people.

Victoria


Same. I'm very particular about my vegan diet and really enjoy selecting my food. I would not want someone else selecting my collards or mustard greens. I am particularly particular about my greens. But everything else too to some extent. If people don't have time to shop for food now, then they are probably eating out. So it will hopefully improve their diets if they can find time to cook real food.

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Re: Amazon Buys Whole Foods

Post by susze » Sun Jun 18, 2017 6:31 pm

CyclingDuo wrote:Call us skeptical, but we don't get this deal. Or at least we don't get the idea that it is going to be total disruption of the grocery industry as we know it like certain business media were pounding the table on Friday claiming.

Local grocery stores already deliver in our area and have for years (heck, they were doing that in NYC back in the 70's and 80's). Meh...
You can order Pastrami from Katz's deli in NYC and have it show up on your doorstep anywhere in the US. Meh...
You can order fresh cherry pie from Michigan and have it show up on your doorstep. Meh...
You can order cases of wine from most vineyards and have it show up on your doorstep. Meh...
You order a case of organic olive oil from Italy and have it appear on your doorstep in a few days. Meh...
Schwans has been delivering groceries in rural areas to your doorstep for decades. Meh...
HelloFresh (and many others) delivers all the ingredients needed to your doorstep to cook your meals. Meh...
Omaha Steaks delivers - and has for years - some excellent beef to your doorstep. Meh...
Grocery stores have used scanners at the checkout stand for years streamlining the process, and baggers will either take the bags to your car, or load them in if you pull up with your car. Meh...

Most of us prefer to put our hands on the fresh produce and choose our own. An avocado is not an avocado. An apple is not an apple. A steak is not a steak. You've got to see it, feel it and choose it for the best selection. Do we want some hourly wage earner loading up a box of groceries that they choose for us, and deliver?

What exactly about this deal is so exciting that the entire grocery industry is going to be disrupted and change the process of going to the store, the market, the Saturday Farmer's Market, the current way we buy and ingest our food?

Are we all seriously going to stay at home, order everything to have delivered to our doorstep while we are glued to a computer or phone screen?

Remaining skeptical about all the optimism and excitement. So far, the winners were the shareholders of Whole Foods. It's hard to imagine this is the end of Costco, Krogers, Wal-Mart, Safeway, insert your favorite grocery chain here: ________________ .

(Disclaimer: We do own shares of Wal-Mart and Amazon. We shop at Fareway, Hy-Vee, Safeway, Wal-Mart, Whole Foods, Trader Joes, Costco, local produce markets, local Farmer's markets, etc...)


In terms of the in person shopping experience I imagine amazon is going with what they are doing in their test store. Where you just load up your cart and walk out. No scanning,no checkout,no weighing.

They had a cart that has sensors, scale and location tracking to know what you put in the cart. Just load up and walk out.

I think the test store did just ok but one thing they were lacking was definitely data. Now they have all the WF data or whatever they wish to track going forward from X number of shoppers to make it work better.

I imagine this is 3-5 yrs away.
Last edited by susze on Sun Jun 18, 2017 7:03 pm, edited 1 time in total.

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Re: Amazon Buys Whole Foods

Post by Barefootgirl » Sun Jun 18, 2017 6:47 pm

In this area, also considered affluent and densely populated, there's a growing wave of large German or German-connected grocers:

Lidl, Aldi and Trader Joes - all quite literally moving into spaces once occupied by Safeway and similar, new stores in the past couple years and several more scheduled to open in 2017 and 2018. The word is they do organic and variety and freshness - better and cheaper. The joke is that Lidl is the Ikea of grocery stores.

I think it's a good thing. American grocers are nothing to get shook up over.
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Re: Amazon Buys Whole Foods

Post by CyclingDuo » Sun Jun 18, 2017 7:27 pm

randomguy wrote:
CyclingDuo wrote:Who actually requires 2 hours a week to shop for their food? Serious question, by the way. We roll our carts a lot faster than that!


I do. I go 2x/week as fruits tend to be good for 3-4 days max and the specials mean you tend to want to hit 2 stores/week. It takes 10-15 mins to get there, ~30-40 mins to shop, and 10-15 mins to get back home. That is ~2 hours/week. Adn rolling the cart faster doesn't really help. The issue is more transit time and checking out. Even with self checkout:) Sometimes you can save some driving time but the stores are not on routes I normally take. I have no clue what the exact average is but I would be shocked if many people do it under an hour/week.

It would be incredible to hear the business case that was made internally to buy whole foods (versus any other grocery or doing it themselves). We are left guessing on if they think the big value is in home delivery or getting people to the stores.

It should be noted that a store like trader joes has done pretty well and you don't get to pick much (any?) of your produce out. I don't know if anyone would have expected that when they launched.


Thanks for your response. I guess we are fortunate that all three local grocers are only 2-5 minutes by car from our house. Even closer from our work (about a minute). We never spend more than 15 minutes in the store selecting our food. Plenty of checkout lines that are never more than 2 or 3 deep, and if they are - management calls for more checkers ASAP. Maximum of 25-30 minutes for a full grocery run with enough food to last a week or more. And we actually really enjoy going to the store to shop.

Even if it was 2 hours a week, that pales in comparison to the 8-14 hours a week on the bike that we spend. :sharebeer

CyclingDuo

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Re: Amazon Buys Whole Foods

Post by nisiprius » Sun Jun 18, 2017 7:36 pm

1) I have great respect for Bezos, but is anyone clear on why this will succeed when Webvan failed?

2) Everyone's assuming that the idea must be "groceries over the Internet," but, curiously, Amazon is starting to tentatively open some brick-and-mortar bookstores with print books in them (and of course Kindles).

3) Apropos of nothing, what do people know about Amazon Prime Pantry? I first became aware of it when we were visiting friends on an island in Casco Bay about two years ago. There is no supermarket on the island, things come on the ferry, and at least one grocery store does deliveries via ferry... but I also saw some Amazon Prime Pantry boxes and wondered what was with that.
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Re: Amazon Buys Whole Foods

Post by VaR » Mon Jun 19, 2017 1:52 am

nisiprius wrote:3) Apropos of nothing, what do people know about Amazon Prime Pantry? I first became aware of it when we were visiting friends on an island in Casco Bay about two years ago. There is no supermarket on the island, things come on the ferry, and at least one grocery store does deliveries via ferry... but I also saw some Amazon Prime Pantry boxes and wondered what was with that.

I use it to buy a lot of my boxed groceries - crackers, cereal, breakfast bars, shampoo, soap, laundry detergent, etc. I'm hoping that the Whole Foods acquisition will increase the selection and quality of the food available through Prime Pantry.

Either I'm less picky than all the other posters here or I'm less tolerant of wasting my time going up and down aisles looking for stuff, but I'm looking forward to the day when my groceries are delivered to me.

That said I'm not sure if fresh grocery delivery is the goal here. Maybe the majority of people would be ok with having packaged good delivered but going to the store for fruit, vegetables, meat and seafood? That would take us back to the old model of shopping for different foods in different places. Maybe we'll come full circle and go back to having a fruit seller, vegetable seller, butcher, and fishmonger - and Amazon Prime Pantry for everything else?

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Mon Jun 19, 2017 3:00 am

CyclingDuo wrote:
kjvmartin wrote:If you are into individual stocks, this seems like it could be a good buying opportunity for stocks like Costco and others. This seems to have been over sensationalized by media.

Be fearful when others are greedy, greedy when others are fearful.


That was exactly our modus operandi on Friday. Used the sell off in Wal-Mart to add more shares. The nearest Whole Foods is 26 miles from our house. We went there a few times when it opened years ago along with all the hooplala surrounding the opening of it. After a few shopping visits there, we found there was no "there" there compared to the other offerings throughout the area. At least nothing to make it a regular stop. Right back to our usual stomping grounds of where we buy our produce, meats, breads, cheeses, wines, cereal, etc...


In some ways the UK grocery market is ahead of the US one - online shopping etc. Also when WalMart bought Asda, they said they learned a lot about own label.

So take warning from the UK. The problem is not what Amazon does with Whole Foods, the problem is what Aldi and Lidl do (I gather you have both Aldis in the USA? - the company was split into 2 a long time ago). They are 25% market share in Germany, 10% in the UK but growing at double digits. As middle class consumers face income squeezes, they are switching to Aldi and Lidl-- I know people on $150k+ US doing that here (UK). Shopping basket is typically as much as 20% cheaper.

If Aldi & Lidl get to 25% of the US food market, that's going to hurt. There's no intrinsic reason why they won't do that in the UK. Germany has been a low inflation & low income growth economy for a lot longer than US or UK (we hid that via higher consumer borrowing, but that trend is probably almost over).

WalMart is also non food retail. So what they achieve there matters. Note that Asda (WalMart UK), a grocery store, is now also the largest single clothes fashion line in the country (a range called George)-- entirely own label.

The US is badly overspaced though in retail- -far higher square foot per consumer than even Canada. Granted the malls will take the worst pain, are taking that pain. But WalMart is so huge, it has to take pain too.

Yes, ours is only one opinion. However, we felt it had to be said with all the dancing in the streets that was going on this past Friday. If this major disruption totally changes the entire grocery industry like we've never seen before, we shall see. Who actually requires 2 hours a week to shop for their food? Serious question, by the way. We roll our carts a lot faster than that!

We imagine Bezos and team have a well thought out plan, but our opinion is it will only serve a niche market. If you find us ordering an organic head of lettuce on Amazon.com and having it shipped to us as our only option 10 years from now, we'll eat our words - and the lettuce, of course. :mrgreen:


I think it must be about synergies in the delivery business, increasing thru-put on the logistics and delivery infrastructure. Rather than food itself which does not seem that attractive a market, intrinsically.

Also as Fortune magazine suggested, possibly to hit the pharmaceutical market. I can see that. An aging population will make more visits to the drugstore to pick up prescriptions etc, and I can see how that fits with Amazon model (relatively high value per product, highly variegated products-- one drug is not another drug; similarities to books & CDs).
Last edited by Valuethinker on Mon Jun 19, 2017 3:08 am, edited 1 time in total.

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Mon Jun 19, 2017 3:07 am

nisiprius wrote:1) I have great respect for Bezos, but is anyone clear on why this will succeed when Webvan failed?

2) Everyone's assuming that the idea must be "groceries over the Internet," but, curiously, Amazon is starting to tentatively open some brick-and-mortar bookstores with print books in them (and of course Kindles).


Partly this must be about economies on existing infrastructure. More thru-put through the same facilities & vans, etc. I can't see that home food delivery, given how US suburbs work*, is more than a niche market. A good niche-- targetting families with working professional women plus young singles and couples, but not the whole market by any means.

I think the idea that it is about pharmaceuticals (a regulatory nightmare, you probably have to go state by state for approvals?) has a lot of legs. An aging population has more prescriptions to pick up, and reaches a point where home delivery would be welcome.

3) Apropos of nothing, what do people know about Amazon Prime Pantry? I first became aware of it when we were visiting friends on an island in Casco Bay about two years ago. There is no supermarket on the island, things come on the ferry, and at least one grocery store does deliveries via ferry... but I also saw some Amazon Prime Pantry boxes and wondered what was with that.


Don't know, but Amazon is a company that quite deliberately tries a lot of things which then fail and get withdrawn. Bezos is emphatic about that. So is Google of course, but they don't advertise that.

* you have low population densities. Curved roads which mean more driving. Suburbs are built by large corporations, and tend to have very limited access points to the outside of the suburb (connections to main highways etc.). Delivery operations rely on route density to increase profitability, usually-- more stops serviced per truck.

Also in most suburbs no one is home during the day? i.e. most women (and men) work. Maybe now there is a work from home 1 day a week trend, but still you are going to have a lot of "dead drops" (customer not home).

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Re: Amazon Buys Whole Foods

Post by CyclingDuo » Mon Jun 19, 2017 5:15 am

Valuethinker wrote:In some ways the UK grocery market is ahead of the US one - online shopping etc. Also when WalMart bought Asda, they said they learned a lot about own label.

So take warning from the UK. The problem is not what Amazon does with Whole Foods, the problem is what Aldi and Lidl do (I gather you have both Aldis in the USA? - the company was split into 2 a long time ago). They are 25% market share in Germany, 10% in the UK but growing at double digits. As middle class consumers face income squeezes, they are switching to Aldi and Lidl-- I know people on $150k+ US doing that here (UK). Shopping basket is typically as much as 20% cheaper.

If Aldi & Lidl get to 25% of the US food market, that's going to hurt. There's no intrinsic reason why they won't do that in the UK. Germany has been a low inflation & low income growth economy for a lot longer than US or UK (we hid that via higher consumer borrowing, but that trend is probably almost over).


Having lived and worked in Austria and Germany for many years (which included shopping at Lidl and Aldi from time to time), we have no concerns about Aldi and Lidl being much of a threat here in the US. We're back in the states now. Our local Aldi in our town gave it a go and closed many years ago as nobody shopped there compared to the other better grocers. I really only went for the Ritter Sport bars which I can get at Walmart or Walgreens. Now the nearest Aldi is about a 12 mile drive for us, and that store is really struggling as well. It's a beautiful new building, but when you go inside there is no "there", there. Poor selection, and not much ends up in people's carts. They just do not have the selection or quality to survive in their current format compared to all the other grocers including mega-stores like Walmart/Target/Costco plus three Midwest chains where everybody prefers to shop - and the Trader Joes, and the Whole Foods, and the local produce markets, and the Saturday Farmer's markets, and the Dollar stores, etc.

Valuethinker wrote:I think it must be about synergies in the delivery business, increasing thru-put on the logistics and delivery infrastructure. Rather than food itself which does not seem that attractive a market, intrinsically.


We shall see if those synergies are enough to totally disrupt the current grocery business as we know it.

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Re: Amazon Buys Whole Foods

Post by jabberwockOG » Mon Jun 19, 2017 8:16 am

Clearly the herd and media loves the Amazon - WF deal. I saw it as a great opportunity to pick up Costco shares (down 14 and change Friday morning). Amazon is certainly a great business with an excellent operations model and they are a significant innovator but more than a few things Bezos has tried have not been successful. My guess is that buying a troubled grocery chain that was losing marketshare and making that business grow and regain and expand market-share in a super competitive business is going to be a lot more costly and challenging than many expect.

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Re: Amazon Buys Whole Foods

Post by BrandonBogle » Mon Jun 19, 2017 10:59 am

Valuethinker wrote:I gather you have both Aldis in the USA? - the company was split into 2 a long time ago


In my area, there is no Lidls and I hadn't heard of the company prior to this thread. Around me, there are many (successful) Aldis, Whole Foods, EarthFare, Trader Joes, Walmart Supercenter/Neighborhood Market, Target Groceries, Food Lion, Harris Teeter (regional store), Publix (large, expanding regional store), The Fresh Market (regional store), and a number of farmer market stores. We have Amazon Prime Same Day delivery for some items, Next Day Delivery for most items, are serviced by Prime Pantry, and have Amazon Lockers abound.

As others have said, I see this less about fresh produce and more about packaged goods to expand Pantry (or fold Pantry under the Whole Foods brand) and the grocery supply chain and logistics Whole Foods brings to the table.

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Mon Jun 19, 2017 12:08 pm

CyclingDuo wrote:
Valuethinker wrote:In some ways the UK grocery market is ahead of the US one - online shopping etc. Also when WalMart bought Asda, they said they learned a lot about own label.

So take warning from the UK. The problem is not what Amazon does with Whole Foods, the problem is what Aldi and Lidl do (I gather you have both Aldis in the USA? - the company was split into 2 a long time ago). They are 25% market share in Germany, 10% in the UK but growing at double digits. As middle class consumers face income squeezes, they are switching to Aldi and Lidl-- I know people on $150k+ US doing that here (UK). Shopping basket is typically as much as 20% cheaper.

If Aldi & Lidl get to 25% of the US food market, that's going to hurt. There's no intrinsic reason why they won't do that in the UK. Germany has been a low inflation & low income growth economy for a lot longer than US or UK (we hid that via higher consumer borrowing, but that trend is probably almost over).


Having lived and worked in Austria and Germany for many years (which included shopping at Lidl and Aldi from time to time), we have no concerns about Aldi and Lidl being much of a threat here in the US. We're back in the states now. Our local Aldi in our town gave it a go and closed many years ago as nobody shopped there compared to the other better grocers. I really only went for the Ritter Sport bars which I can get at Walmart or Walgreens. Now the nearest Aldi is about a 12 mile drive for us, and that store is really struggling as well. It's a beautiful new building, but when you go inside there is no "there", there. Poor selection, and not much ends up in people's carts. They just do not have the selection or quality to survive in their current format compared to all the other grocers including mega-stores like Walmart/Target/Costco plus three Midwest chains where everybody prefers to shop - and the Trader Joes, and the Whole Foods, and the local produce markets, and the Saturday Farmer's markets, and the Dollar stores, etc.


You may be right. But the UK supermarket multiples (Sainsburys, Tesco, Asda (WMT), Morrisons) more or less made the same arguments-- selection, quality etc.

Comes the economic crisis, and real family incomes are under pressure, and lo-and-behold, Aldi and Lidl started making double digit same store sales numbers. Turns out the average shopper doesn't need 10 types of crisps (potato chips) they are happy with one, at a 30% lower price. The UK is the largest Prosecco (Italian sparkling wine) consumer in the world, and Aldi and Lidl do an own label brand. Etc. etc.

The arguments dropped away, and the big 4 have had to fight back on price. Aldi and Lidl are continuing to roll out. They need smaller stores (because the range of products is much lower) and so they can invade territories that otherwise look overstored -- retail High Streets etc.

If they can genuinely offer lower prices and similar value, then I think they can hurt the US grocery retailers as well. The US has the same issues re family incomes that the UK and Germany have. I gather in Germany you see BMW and Mercedes in the parking lots-- there's no shame in shopping at the hard discounters.

Valuethinker wrote:I think it must be about synergies in the delivery business, increasing thru-put on the logistics and delivery infrastructure. Rather than food itself which does not seem that attractive a market, intrinsically.


We shall see if those synergies are enough to totally disrupt the current grocery business as we know it.
[/quote]

I still don't see that groceries is what they are aiming at, but ?who knows? they must have seen an opportunity. I *think* it's about putting more down the same pipe (delivery) plus perhaps pickup for Amazon products at WF outlets?

But I also know that I don't know enough ;-).

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Re: Amazon Buys Whole Foods

Post by Leemiller » Mon Jun 19, 2017 12:36 pm

ponyboy wrote:I find it interesting that people worship bezos/amazon...when in reality he's done more to kill brick and mortar stores than waltons/walmart did.

Double standard much?? Now amazon is buying grocery chains...they're been in the tv/movie business now for a couple years and are starting to create their own content. Wonder when people will start hating on bezos? Or is everyone going to keep loving him because its convenient?


Because the people who criticize Walmart don't shop there and tend to be in a different socio-economic class then those who do shop there. They do, however, shop on Amazon.

Many in my neighborhood already use instacart to have groceries delivered from Whole Foods.

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Re: Amazon Buys Whole Foods

Post by learning_head » Mon Jun 19, 2017 3:57 pm

Admiral wrote:I don't mind paying more for organic fruit/produce/meats, but what's annoying about WF is that they charge more for the exact same product at Trader Joes. It's just gouging plain and simple. Try pricing a 28 oz can of San Marzano whole tomatoes at both places. WF is like a dollar more. So annoying.


kjvmartin wrote:I already go to Costco for many things, Kroger for a few things, Meijer for everything else and am able to buy almost everything organically. Add in some special things at Trader Joes from time to time....

Whole Foods has organic foods, but I can't figure for the life of me why I'd add another store to my rotation, especially with their reputation for inflated prices. Are margins much higher on organic food? Can they use those margins to pad shipping costs? If someone could deliver all of my groceries to me, I'm not sure what that'd be worth.


+1. Used to shop at WF for foods that benefit the most from being organic. Never anything else because all non-organic products I price-checked were *twice* the price vs other stores in the area. Now, everything that I like to get organic is at regular stores too and even Aldi started carrying organic milk and some other items!

As for Amazon, I find that without Prime, jet.com is often a better, faster, and yes, a cheaper option. Too many products I used to get on Amazon are now prime-only. I imagine / hope it will only get better with walmart acquiring it.

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Re: Amazon Buys Whole Foods

Post by CyclingDuo » Mon Jun 19, 2017 6:10 pm

Valuethinker wrote:Comes the economic crisis, and real family incomes are under pressure, and lo-and-behold, Aldi and Lidl started making double digit same store sales numbers. Turns out the average shopper doesn't need 10 types of crisps (potato chips) they are happy with one, at a 30% lower price. The UK is the largest Prosecco (Italian sparkling wine) consumer in the world, and Aldi and Lidl do an own label brand. Etc. etc.

The arguments dropped away, and the big 4 have had to fight back on price. Aldi and Lidl are continuing to roll out. They need smaller stores (because the range of products is much lower) and so they can invade territories that otherwise look overstored -- retail High Streets etc.


Most of my experience at Lidl and Aldi in Europe, and here in the states have been in smaller stores. And most were located right next to or nearby a baker, a cheese shop, a butcher - so one would get those items there, and the really "cheap" stuff at the Aldi or Lidl. The Aldi that was in our town which folded, as well as the brand new one 12 miles up the road are also of the smaller store variety which has not really been the preferred format for grocery shopping in the US. Plus, up to this point, they have been filled with a lot of items in the stores that appeal to Europeans, but Americans won't touch. They will have to alter that for any chance of attracting the US consumer when it comes to brands, styles of food, and selection. If they do that, well - they'll be just another low cost grocer of which we have many already. The convenience of large grocery stores that have their own bakeries, butchers, cheese shops, and everything under one roof permeates the majority of the style of grocery shopping in America. I could see Aldi/Lidl competing with a similar large store format, but don't know if they have plans to build such large stores. If they do, the competitive space is rather crowded. The smaller store format has very limited appeal in very large urban areas (say NYC, San Francisco, portions of Chicago and Philly). It all remains to be seen, but the big chains already all offer store brand, generic brands at really low cost compared to branded items. So shoppers of all economic means are shopping at the same stores with "something for everyone" being the norm. That will be hard to crack - or at least that is the opinion in this household.

Valuethinker wrote:If they can genuinely offer lower prices and similar value, then I think they can hurt the US grocery retailers as well. The US has the same issues re family incomes that the UK and Germany have. I gather in Germany you see BMW and Mercedes in the parking lots-- there's no shame in shopping at the hard discounters


No arguments there. The same is said here in the states. 95% of the US population shopped at a Walmart store or on their website in 2016. http://www.cnbc.com/2017/04/12/nearly-e ... -year.html

There is a real game going on between Walmart and Amazon, but we'll see if that game spreads to a big grocery game between the two of them compared to the other online sales game.

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Re: Amazon Buys Whole Foods

Post by moghopper » Mon Jun 19, 2017 6:42 pm

CyclingDuo wrote:
Having lived and worked in Austria and Germany for many years (which included shopping at Lidl and Aldi from time to time), we have no concerns about Aldi and Lidl being much of a threat here in the US. We're back in the states now. Our local Aldi in our town gave it a go and closed many years ago as nobody shopped there compared to the other better grocers.


Hmm... Aldi has been building out their infrastructure, and is seemingly prepped to increase their store footprint.
http://fortune.com/2017/06/12/german-grocery-chain-aldi-expand-stores/
The latest store expansion will create 25,000 U.S. jobs and make Aldi the third-largest grocery chain operator in the country behind Wal-Mart and Kroger (KR, +1.57%), the German chain said in a statement. Aldi's 2,500 stores would equal about 53% of Wal-Mart's U.S. outlets.


Frankly I won't be surprised to see that groceries, like some other industries, will become "hollowed out", whole foods and specialty grocers taking the top end, while Aldi and Walmart take the low end, and I suspect there will be less and less room for the traditional grocers in the middle.

For Amazon, I think the next interesting move would be to purchase someone like Blue Apron.

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Re: Amazon Buys Whole Foods

Post by btenny » Mon Jun 19, 2017 10:20 pm

Anyone have a guess who the other suitor is for Whole Foods? The market annalists think the price offered by Amazon is too low for Whole Foods and that one or two other big players will step in and bid for the company at a higher price.

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Tue Jun 20, 2017 8:03 am

CyclingDuo wrote:
Valuethinker wrote:Comes the economic crisis, and real family incomes are under pressure, and lo-and-behold, Aldi and Lidl started making double digit same store sales numbers. Turns out the average shopper doesn't need 10 types of crisps (potato chips) they are happy with one, at a 30% lower price. The UK is the largest Prosecco (Italian sparkling wine) consumer in the world, and Aldi and Lidl do an own label brand. Etc. etc.

The arguments dropped away, and the big 4 have had to fight back on price. Aldi and Lidl are continuing to roll out. They need smaller stores (because the range of products is much lower) and so they can invade territories that otherwise look overstored -- retail High Streets etc.


Most of my experience at Lidl and Aldi in Europe, and here in the states have been in smaller stores. And most were located right next to or nearby a baker, a cheese shop, a butcher - so one would get those items there, and the really "cheap" stuff at the Aldi or Lidl. The Aldi that was in our town which folded, as well as the brand new one 12 miles up the road are also of the smaller store variety which has not really been the preferred format for grocery shopping in the US. Plus, up to this point, they have been filled with a lot of items in the stores that appeal to Europeans, but Americans won't touch. They will have to alter that for any chance of attracting the US consumer when it comes to brands, styles of food, and selection. If they do that, well - they'll be just another low cost grocer of which we have many already. The convenience of large grocery stores that have their own bakeries, butchers, cheese shops, and everything under one roof permeates the majority of the style of grocery shopping in America. I could see Aldi/Lidl competing with a similar large store format, but don't know if they have plans to build such large stores. If they do, the competitive space is rather crowded. The smaller store format has very limited appeal in very large urban areas (say NYC, San Francisco, portions of Chicago and Philly). It all remains to be seen, but the big chains already all offer store brand, generic brands at really low cost compared to branded items. So shoppers of all economic means are shopping at the same stores with "something for everyone" being the norm. That will be hard to crack - or at least that is the opinion in this household.


Thank you, that is interesting -- you know a lot about this (more than I! ;-).

The only thing I might shade is that one could have said the same thing about UK grocery multiples. They had low cost own label etc. Yet Aldi and Lidl are making life very hard for them.

I am aware that Americans shop differently (single drive to large all service stores). However that's actually the predominant pattern in the UK, too. The Saturday morning shop at the superstore. There is a trend towards more "grazing" now (shopping smaller amounts during the week) which favours more local retailers. But I pass the local Lidl on the bus, and I see huge queues of people doing their shopping ... and this is in a (relatively) middle class affluent part of outer London.

Yes local tastes matter. IKEA found a way into the hearts of Americans. Tesco tried quite hard (Fresh & Easy) and totally flubbed it, totally.

Valuethinker wrote:If they can genuinely offer lower prices and similar value, then I think they can hurt the US grocery retailers as well. The US has the same issues re family incomes that the UK and Germany have. I gather in Germany you see BMW and Mercedes in the parking lots-- there's no shame in shopping at the hard discounters


No arguments there. The same is said here in the states. 95% of the US population shopped at a Walmart store or on their website in 2016. http://www.cnbc.com/2017/04/12/nearly-e ... -year.html


Is WalMart in the box though of offering a very broad range of products? Thus needing lots of space and risking confusing the consumer?

Because that's where Aldi + Liddle found the opening. 2,000-2,500 products not 25,000+. And brutally low prices on the own label.

There is a real game going on between Walmart and Amazon, but we'll see if that game spreads to a big grocery game between the two of them compared to the other online sales game.


The "bricks and clicks" model where you pick up and can return at the store seems to have legs, here. Especially for shoes & clothing. This seems to be what Amazon is aiming towards?

It's just hard to see groceries as an attractive online market. In and of themselves.

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Tue Jun 20, 2017 8:04 am

btenny wrote:Anyone have a guess who the other suitor is for Whole Foods? The market annalists think the price offered by Amazon is too low for Whole Foods and that one or two other big players will step in and bid for the company at a higher price.


The Board will have appointed bankers to solicit offers. I am guessing other grocery chains. Anyone else coming in to the industry wouldn't have the expertise/ economies of purchasing from suppliers-- limited synergies.

Maybe it's Google ;-). Or Uber ;-). Other industries for them to "disrupt" in the current Silicon Valley buzz phrase ;-).

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Re: Amazon Buys Whole Foods

Post by JMacDonald » Tue Jun 20, 2017 8:18 am

It will be interesting to see what Amazon does with Whole Food. I don't see it working where I live. There is just too much competition among different grocery stores. Fresh and Easy found that out. I see a closed former Fresh and Easy Store locally: https://en.wikipedia.org/wiki/Fresh_%26_Easy
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Re: Amazon Buys Whole Foods

Post by JupiterJones » Tue Jun 20, 2017 10:24 am

VictoriaF wrote:My Whole Foods is a 20-minute walk away.


Mine's close too. I usually ride my bike, in fact. It's great being able to "park" right by the front door. :-) (And the fact that I have to carry my groceries home in a rear basket puts a nice upper limit on how much I can buy!)

I have the Amazon Prime credit card. It gives you 5% cash back on Amazon purchases, but only 1% cash back at grocery stores. Sure would be nice if the purchase wound up making WF "count" as an "Amazon" purchase. :moneybag
Stay on target...

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Re: Amazon Buys Whole Foods

Post by PatrickA5 » Tue Jun 20, 2017 12:12 pm

Whole Foods - have one within a half mile and have never been in it. Amazon might change this if the prices come down.

WalMart - 95% of our groceries. Love to order everything online and pick it up. Only thing better would be free delivery.

Aldi's - Used to go there quite a bit. It's probably a good 20% cheaper than Wal Mart and 40% cheaper than our local full service grocery store. When I'm on a saving money kick, I tend to go there.

Amazon - Buy almost everything other than food/groceries. Love it!

With Amazon and Walmart online pickup, I rarely see the inside of a grocery store. Which is fine with me!

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Re: Amazon Buys Whole Foods

Post by VictoriaF » Tue Jun 20, 2017 12:21 pm

PatrickA5 wrote:Amazon - Buy almost everything other than food/groceries.


I buy some food from Amazon, e.g., tea (black, green, white), capers, smoked kippers. But most of my food is fresh and comes from Costco, Whole Foods, and Safeway.

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Re: Amazon Buys Whole Foods

Post by MP173 » Tue Jun 20, 2017 5:09 pm

Supermarket industry is changing radically...and quickly.

Here in Indiana, two medium sized independents are gone....Marsh in Central Indiana and Stracks/Ultra/Town and Country in NW Indiana. A large co-op owned by independents in Chicago (Central Grocers - Centrella brand) is bankrupt and closed. This has occurred very rapidly this year.

Two months ago a person told me that a major grocery chain said that in a couple of years there will only be 4 big players...Albertsons, Kroger, Walmart....and drum roll - Amazon. How will Aldi fit in this? Same person indicated that they possibly will be purchased by one of the big players.

Meanwhile...Aldi just announced a $5B expansion including 900 new stores and remodeling.

We shop at several stores, based on our needs, time, etc. Once per month at Costco, occassionally at Aldi, and mostly at a Stracks (which will become a Jewel which is owned by Albertsons). I also like Marianos in Chicago which is Kroger owned.

Our last trip to Aldi was an eye opener for me. Efficient, friendly staff (well paid), limited selection but very aggressively priced. Plus their quality is either going up or their marketing is.

What is hurting the retail food stores? Two big issues now are delivered meal plans and on line and delivery of groceries.

Delivered meal plans - take the shopping out of eating. Arrange your meals and the food arrives at your door. No shopping, no planning, very convenient. Works great for a certain demographic...high income, long hours.

On line shopping - you might say the store still has the revenue, but do they? Discretionary buying (a big portion of what I do) is limited. No more samples and buying of expensive cheese, bakery goods, etc.

My guess is that grocery shopping will be radically different in 5 years...

Ed

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Wed Jun 21, 2017 7:12 am

JMacDonald wrote:It will be interesting to see what Amazon does with Whole Food. I don't see it working where I live. There is just too much competition among different grocery stores. Fresh and Easy found that out. I see a closed former Fresh and Easy Store locally: https://en.wikipedia.org/wiki/Fresh_%26_Easy


Fresh and Easy was Tesco (world's 3rd largest grocery retailer, I believe, or was) attempt to crack the US market. Many UK retailers have tried (Marks and Spencers buying Brooks Brothers) and failed.

Despite spending a lot of time and money researching they tried things (apples wrapped in plastic) which work well in the UK but not the USA. And they opened up just before the housing crash, in precisely the places (e.g. new suburbs) that were worst for sub prime-- California, Nevada, Arizona etc.

Eventually they wrote off the whole investment, and paid some entrepreneur with a track record in food retail to take the remaining stores (less the sites he didn't want) off of their hands.

It's a case study of corporate hubris. In the meantime they neglected investment in their crown jewel, the leading UK food retailer, and are getting hammered there, too.

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Wed Jun 21, 2017 7:18 am

MP173 wrote:Supermarket industry is changing radically...and quickly.

Here in Indiana, two medium sized independents are gone....Marsh in Central Indiana and Stracks/Ultra/Town and Country in NW Indiana. A large co-op owned by independents in Chicago (Central Grocers - Centrella brand) is bankrupt and closed. This has occurred very rapidly this year.

Two months ago a person told me that a major grocery chain said that in a couple of years there will only be 4 big players...Albertsons, Kroger, Walmart....and drum roll - Amazon. How will Aldi fit in this? Same person indicated that they possibly will be purchased by one of the big players.


I think they are underestimating Aldi. Pull out of the USA? Only if it turns out to be a really bad market.


Meanwhile...Aldi just announced a $5B expansion including 900 new stores and remodeling.

We shop at several stores, based on our needs, time, etc. Once per month at Costco, occassionally at Aldi, and mostly at a Stracks (which will become a Jewel which is owned by Albertsons). I also like Marianos in Chicago which is Kroger owned.

Our last trip to Aldi was an eye opener for me. Efficient, friendly staff (well paid), limited selection but very aggressively priced. Plus their quality is either going up or their marketing is.


Similar to what is going on here (UK) and has already taken place in Germany.

What is hurting the retail food stores? Two big issues now are delivered meal plans and on line and delivery of groceries.

Delivered meal plans - take the shopping out of eating. Arrange your meals and the food arrives at your door. No shopping, no planning, very convenient. Works great for a certain demographic...high income, long hours.

On line shopping - you might say the store still has the revenue, but do they? Discretionary buying (a big portion of what I do) is limited. No more samples and buying of expensive cheese, bakery goods, etc.

My guess is that grocery shopping will be radically different in 5 years...

Ed


I can see groups that will go for these. Online shopping + "grazing" (shopping after work at local formats of the food retailers) seems to be a definite trend (in the UK).

I do think though that given that Americans are conditioned to drive to the supermarket, if someone like Aldi is expanding aggressively, with their price proposition they can take market share. The situation where median real family incomes haven't risen much is like Japan in the last 27 years, Germany in the last 20-ish, UK last 10 (fallen). And that will push people towards saving money. In all these places the hard discounters have taken market share.

Online groceries, if they are profitable at all, must be more at the high end. An online grocery store has to pick-and-pack then get it to your door. Whereas currently much of picking and packing is done by you (they still have to put it on the shelves, but that's also true in an online grocery format) and you do the delivery for no labour cost to them, and no depreciation on the vehicle, no gasoline cost.

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Re: Amazon Buys Whole Foods

Post by WhyNotUs » Wed Jun 21, 2017 7:59 am

If you know where the grocery industry is heading, make your play. The CEOs and CFOs of major grocers seem to be less confident. I have spent some time looking into it for professional reasons and am humbled by the possible futures. I personally think Amazon is paying a lot for less than 500 stores that are struggling with same store sales. But since Amazon's creed is growth over profit I have never known what to make of them. Certainly taking the burden of actually earning a profit could change the "Whole Paycheck" issue.

My anecdotal experience is that more Amazon boxes are showing up at our house and I see big bags of dog food on neighbors decks. Amazon Prime was a brilliant move if the metric is grabbing market. As for groceries, the Amazon Pantry, which restocks vanilla items that one purchases each week- toilet paper, cereal, coffee, etc. seems to make some sense. With an aging population it could make more sense as time goes by. I have never tried it and am unlikely to any time soon.

Amazon having a brick outlet for delivery/pickup makes sense if they are successful in developing their own fleet to avoid USPS and UPS but 500 stores will not address that in any scale. If this was their model, why not buy Safeway?

The low cost grocers from Europe make sense given household economics and there will be lots of cheap non-prime retail space available for the foreseeable future as chains shrink. Maybe they will catch on like some are predicting.

If one was the director of strategy for Kroger or Safeway it would be a very curious and uncertain time. If location and hands on selection count in the future, then those two have a good position to start. It would be hard for me to project a future in which they hold the same amount of market share. At the same time, the threats like Pantry are to the lowest markup items. Grocery stores have been growing into giant delis over the years in search of markup. We will have to wait and see.
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JMacDonald
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Re: Amazon Buys Whole Foods

Post by JMacDonald » Wed Jun 21, 2017 8:54 am

Valuethinker wrote:
JMacDonald wrote:It will be interesting to see what Amazon does with Whole Food. I don't see it working where I live. There is just too much competition among different grocery stores. Fresh and Easy found that out. I see a closed former Fresh and Easy Store locally: https://en.wikipedia.org/wiki/Fresh_%26_Easy


Fresh and Easy was Tesco (world's 3rd largest grocery retailer, I believe, or was) attempt to crack the US market. Many UK retailers have tried (Marks and Spencers buying Brooks Brothers) and failed.

Despite spending a lot of time and money researching they tried things (apples wrapped in plastic) which work well in the UK but not the USA. And they opened up just before the housing crash, in precisely the places (e.g. new suburbs) that were worst for sub prime-- California, Nevada, Arizona etc.

Eventually they wrote off the whole investment, and paid some entrepreneur with a track record in food retail to take the remaining stores (less the sites he didn't want) off of their hands.

It's a case study of corporate hubris. In the meantime they neglected investment in their crown jewel, the leading UK food retailer, and are getting hammered there, too.

It didn't surprise me that the local Fresh and Easy Store that now sits empty did not do well. I went in there once after it opened. Nothing about the store appealed to me. I never went back in.

There is only one Whole Food store in the local area that i know of. I have only been in the store once as it is not near by. I find no reason to shop there. Maybe Amazon will do well with Whole Food, but it won't make any difference for me as I rarely buy anything from Amazon. I only buy from Amazon if I can't find what I want somewhere else.
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Re: Amazon Buys Whole Foods

Post by gkaplan » Wed Jun 21, 2017 9:40 am

I live a ten minute walk from a Whole Foods. I shop there at least once a week, primarily for its organic produce, which I find comparable in price to my local Fred Meyer and Trader Joe's, and its lactose-free yogurt.
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Re: Amazon Buys Whole Foods

Post by randomguy » Fri Jun 23, 2017 11:26 pm

nisiprius wrote:1) I have great respect for Bezos, but is anyone clear on why this will succeed when Webvan failed?

.


It is 2017 not 1997. It is a vastly different world. It could be that Webvan was just an idea ahead of its time and with better execution it could be a huge sucess. Amazon did hire a bunch of the webvan guys. Maybe they have learned a lesson from their past failure. Maybe the fact that amazon can invest 10x as much money matters. Or is willing to lose money for a decade. Or has probably the best fulfillment chain management on the planet. Or maybe it is a waste and that online groceries are only going to be a tiny subset of the market in limited areas. It is a fine line between not learning from the past and failing to realize that things are different this time. We can look back in 10 years and figure out who was right.

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Re: Amazon Buys Whole Foods

Post by KarenC » Sat Jun 24, 2017 7:57 am

Here is an interesting perspective:
This is the key to understanding the purchase of Whole Foods: to the outside it may seem that Amazon is buying a retailer. The truth, though, is that Amazon is buying a customer — the first-and-best customer that will instantly bring its grocery efforts to scale.

https://stratechery.com/2017/amazons-new-customer/
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Re: Amazon Buys Whole Foods

Post by tinscale » Sat Jun 24, 2017 8:14 pm

The local Harris Teeter here on the outskirts of Charlotte has a pretty brisk order online/pickup in car business, so it seems quite a few folks don't mind having someone else pick out their the groceries. I've also seen the order pickers picking groceries. They pretty much grab what's there and don't spend time checking expiration dates, picking out the nicest produce, etc.

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Sun Jun 25, 2017 4:34 pm

randomguy wrote:
nisiprius wrote:1) I have great respect for Bezos, but is anyone clear on why this will succeed when Webvan failed?

.


It is 2017 not 1997. It is a vastly different world. It could be that Webvan was just an idea ahead of its time and with better execution it could be a huge sucess. Amazon did hire a bunch of the webvan guys. Maybe they have learned a lesson from their past failure. Maybe the fact that amazon can invest 10x as much money matters. Or is willing to lose money for a decade. Or has probably the best fulfillment chain management on the planet. Or maybe it is a waste and that online groceries are only going to be a tiny subset of the market in limited areas. It is a fine line between not learning from the past and failing to realize that things are different this time. We can look back in 10 years and figure out who was right.


The problem is geographic, though, unless they have figured a clever way around it:

- Americans live in suburbs. In buying power terms that is even more true than in number terms

- those suburbs tend to be large, low density and have limited access from main thru-ways (the classic postwar suburban design-- the grid was abandoned in the post war suburb) so you need to do a lot of driving per delivery. That lower route density raises distribution costs

- American women, by and large, work away from home, and so there's no one home to take deliveries

- congestion during the business day is a major issue in most American cities. One depot cannot serve Los Angeles, nor Atlanta because of traffic issues

- most American households have at least one car, the average is more like 2.0 I believe, and Americans don't find it difficult to drive to grocery stores, every American generally lives within 10 miles of one, easy driving, plus of course on the way home from work (Americans commute by car). Gasoline is very cheap, cars are cheap. Most households that these factors are not true, are not attractive grocery markets (urban yuppies without cars aren't a big enough market (also you cannot deliver to an apartment, easily, unless it has a doorman), poor people aren't an attractive market)

The result is home delivery is always going to be relatively expensive (unless we presume autonomous vehicles and some mechanism to self unload).

Groceries don't have high margins. It's one of the most competitive areas of consumer goods, *and* importantly, the customer has a pretty good idea of what they pay for items, because they do it so often-- making it very competitive. Also for fresh food you need high inventory turnover-- wastage is a real issue.

The UK is significantly ahead of the US in home grocery delivery, it's geographically a much more attractive market, but I don't think any of the supermarkets is making money in it. The pure play, Ocado, doesn't make an operating profit, but is EBITDA positive. One challenge is building purpose built distribution centres (Ocado has) v. "dark stores" (the rest of them).

All this makes this a difficult market to enter-- not particularly attractive.

So, clever ways to get around this:

- people order on line, and pick up. That saves the online retailer the capital and operating costs, labour of all those delivery vehicles

- people have storage lockers at their homes. But does this work on a hot day? It works here, because it doesn't usually get so hot, but in America?

- you use this as a bridge into higher profit margin items. Like prescriptions. *That* I can see (although wouldn't you just buy a chain of pharmacies?)

I am still not sure what Amazon is on about with this. Maybe they saw a cheap asset, and they think they can solve the known problems with online delivery.
Last edited by Valuethinker on Sun Jun 25, 2017 4:43 pm, edited 1 time in total.

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Re: Amazon Buys Whole Foods

Post by Valuethinker » Sun Jun 25, 2017 4:42 pm

https://www.csmonitor.com/Business/The- ... -US-market

http://uk.businessinsider.com/lidls-exp ... -us-2016-9

https://www.forbes.com/sites/walterloeb ... e0545359e4

According to the report Walmart is now offering lower prices than Aldi which is an improvement over recent estimates. Over the past few years Aldi prices were 20% lower than Walmart.


We are entering a period of fierce price competition. It will not be very notable in the first few month, but the effect will be felt throughout the food and discount industry as these new stores grow in number. Both Lidl and Aldi have the resources to grow in the United States. It will be interesting to watch. Everyone must have initiatives to preserve their share of the market – even to gain at the expense of others.


Many of the dismissals given by US operators (and implied by some posts here) sound exactly what the UK food multiples said about 5 years ago -- they were already competitive, the customer would not trust the own label brands, etc.

All of which turned out to be very not true.

Consumer incomes are not rising (or not rising by much). This offers a way to cut bills by 20% on their weekly shopping. It's an obvious saving that anyone can do.

The Financial Times had an article this weekend about Lidl in the USA. One issue is that own label here (UK) has a strong brand credibility, all the food multiples sell a lot of own label. Apparently in the US, according to the article, own label is seen "more for poor people". Penetration of own label is about half the UK. You watch. That can change.

BTW in the cinema last night Lidl was advertising its fresh strawberries -- you know, vignettes of a producer farmer and his poly-tunnels, etc.

Amazon looks like it is expanding into a war zone-- albeit from the high end. Interesting to see what happens.

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Re: Amazon Buys Whole Foods

Post by Phineas J. Whoopee » Sun Jun 25, 2017 4:54 pm

I've come across speculation that Amazon means to use the physical presence to begin addressing the last mile problem, which is that distribution networks are pretty efficient these days except when it comes to delivering individual packages to individual end purchasers. The speculation was Amazon plans to use the stores, which will probably remain high-end grocery stores as well, to get some of its better-heeled customers to bear the cost of last mile delivery themselves, perhaps experimentally like it's testing remote-controlled aircraft.

I have no inside information, but I thought it was an intriguing idea. It's sort of like suggesting that in the future big department stores won't have to go to the expense of printing and mailing thick catalogs to tens of millions of households twice a year, because the customers will use their own equipment, paper, ink, telecommunications, and electricity to take care of it.

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