What Amazon is really after in its Whole Foods acquisition
The Amazon-Whole Foods marriage means Amazon, using its sales data, can curate what Whole Foods sells
"Your margin is my opportunity." This aphorism favoured by Amazon founder and CEO Jeff Bezos is the lens through which we should evaluate Amazon’s intention to buy Whole Foods. After the announcement on Friday, investors were harsh on grocery stores and big-box retailers — but it’s not their margins in which Amazon sees an opportunity. This modern conglomerate is not primarily going after the stores, but the products on the shelves. Grocery stores are a notoriously low-profit-margin business. Kroger, which had $115bn in revenue in its most recent fiscal year, showed a net profit of just less than $2bn, for a profit margin of less than 2%. Costco, with its lucrative membership revenue stream, earned just $2.35bn on revenue of $118.7bn, also a profit margin about 2%. There’s a reason e-commerce has had a difficult time disrupting this business. And location matters in the grocery business. Households don’t want to drive 30 minutes to get a litre of milk and a dozen eggs. As a result, ...
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