business news in context, analysis with attitude

by Kevin Coupe

The deal is done. Amazon now owns Whole Foods. The cost: $13.7 billion.

I may be on vacation this week, but that hasn’t stopped me from watching the coverage of the completion of the deal, and, of course, visiting my local Whole Foods. It would appear that Amazon is taking to heart the Biblical passage about not hiding one’s light under a bushel basket - as you can see from the pictures that I took, there is tons of signage in the store about the new ownership, and there’s nothing coy about it … whether bananas, avocados, or tomato sauce, the message is clear. Amazon is in charge now, and is cutting prices.

And, just to be extra clear about it, there is a display just inside the front door of Amazon’s Alexa-powered Echo and Dot voice-activated smart speaker system. (On sale, natch.)

There has been a lot of coverage of the price-cutting process in the media, and I think it is fair to observe that the stories have focused as much on the prices that were not reduced as the prices that were cut.

The Washington Post, for example, talks to a consumer who paid $13 for oatmeal and says it remains expensive. (I would suggest that if someone pays $13 for oatmeal and if can’t afford it, then the problem isn’t Whole Foods’.) CNBC writes that “a closer look at a broader set of products suggest the discounts are still modest,” and Reuters quotes an analyst as saying that Amazon’s bark is more impressive than the bite it is taking out of prices.

All of this may be true, but it also is true that Amazon only has owned the joint for less than 72 hours. While generally I would argue that there’s only one chance to make a first impression, I actually think that Whole Foods shoppers and wannabe shoppers will cut the retailers a bit of slack as long as the progress is steady, defined and well-communicated. All of which Amazon is perfectly capable of doing. Plus, they have a big card still to play - Amazon Prime membership, which at some point in the future (I’d bet sooner rather than later) it will turn into Whole Foods’ de facto loyalty program.

And in the end, this is really about the Amazon ecosystem … how big and effective it can get, and the extent to which it can disrupt traditional shopping behaviors, and in doing so, create fundamental change in the supply chain that affects competitors and vendors.

Let’s be clear. There will be bumps and bruises, and not everything Amazon will do is going to work. But I do think that this is going to be a fascinating experiment, with Eye-Opening lessons for everyone.

One other thing. I’m sure looking forward to the return of “The Innovation Conversation” next Wednesday, when Tom Furphy and I will discuss the possibilities and pitfalls inherent in the Amazon-Whole Foods deal. I hope you’ll join us.

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