When I was in business school, my teacher said something that stuck with me, and it has been shown to me over and over since. If your core competency is easy to reproduce, then you will not long be a company of any importance. It's why I don't like Snapchat, and it's why I don't like a lot of other 'hot' companies. They will one day completely be supplanted by their bigger rival who was nice enough to wait for them to do all the work. Blue Apron is, in my opinion, easy to replicate. Like you said, and I use it too and really like it, they put some food in a box for people who don't want to spend time shopping. The food goes together in ways according to a card in the box, and they tell you you're doing a solid for the environment like 10 ways along the way. Which, when you have a single egg packaged, strikes me as odd, but I also don't care. The point is, Amazon could do the same thing if they had a grocer. And they could do it cheaper. And they could charge less for it. Hell, they could even make it so that you could just go pick it up ready to go AT the grocery store. And that's a big profit consideration that wouldn't be available without this acquistion. The money in a grocery store produce section is in the slices of pineapple that cost 4 times as much as a pineapple. That's the kind of logistics I'm talking about. But operating closer to your customers also cuts the legs out from Wal-Mart. Wal-Mart has been struggling for years against the online shopper. They've tried to make their own online shopping experience, which in my opinion is not as good as Amazon's. They've also leveraged something against Amazon that Amazon can't keep up with, and that's same-day pick up for items already at the store. Or shipping free pickup for items that are bulky and would otherwise be expensive for Amazon to ship, but because Wal-Mart has a truck going there anyway they can do it no big deal. But Whole Foods also, is very profitable. So even if Amazon didn't do anything, they could still ride a big profit machine. If Amazon, simply continued their no dividends policy for example, they could pocket the cash that Whole Foods shares paid out in dividends which was $44 million. They could close locations that didn't fit their new idea for what Whole Foods looks like in 10 years. They could do a lot of different things with it.
A few things: Yes. Agree completely. This was the death of Groupon - both Amazon and Google said "shit, you want coupons? We got coupons" and that was that. They could. They won't. Silicon Valley doesn't think Blue Apron has much growth potential beyond what they already have, which is why they beat 'em up over profitability. Have you ever checked Amazon Fresh's prices? They're not making money on it, and they're charging more than the grocery store down the street. You're also reliant on the people who can't get a book to you in one piece getting an avocado to you in one piece. And sure - they could step it up. But now they're a food packing industry, rather than a food showcasing industry. Again, better to do that out in the Hinterlands and drive it in. There isn't room in the back of a Whole Foods to build a Blue Apron. If this is what you want to do, stream produce into your existing warehouses. Blue Apron, after all, ships across state lines just fine. Sure - but if Amazon can't sell me that pineapple for less than I can go buy it for, I'm going to go buy it. And Whole Foods can't prep pineapple for less than Costco or Kroger can. And while maybe they can ship it for less, Costco and Kroger have had twenty years since the first dotcom era to see if people want that and they don't. They forcefully don't. I knew a few guys who lost their rippin dotcom jobs at HomeGrocer and none of 'em have popped up doing the same. We tried that 20 years ago and nobody cared. Proximity to a Whole Foods doesn't change that, I don't think. Whole Foods: 437 stores. Walmart: 4100 stores. Walmart is now going online, Amazon is now going brick'n'mortar. I think that, more than anything, illustrates that the expansion is over. $500m a year and declining. That's about a million dollars a store. I mean, I wouldn't turn it down. But I wouldn't spend $13b on it, either. They're exquisitely sensitive to an economic downturn and, as you say, their core competency is easy to reproduce (Wild Oats has been doing it since '86; Safeway has been doing it with Sprouts since '00, then there's the Bristol Farms/Haggen/yourlocal contingent). Look at it this way: Amazon paid 26 years worth of profits for a grocery store. Or, put another way, Amazon paid about eight years' worth of AMAZON profits for a grocery store. I wouldn't have.If your core competency is easy to reproduce, then you will not long be a company of any importance. It's why I don't like Snapchat, and it's why I don't like a lot of other 'hot' companies. They will one day completely be supplanted by their bigger rival who was nice enough to wait for them to do all the work.
The point is, Amazon could do the same thing if they had a grocer.
The money in a grocery store produce section is in the slices of pineapple that cost 4 times as much as a pineapple. That's the kind of logistics I'm talking about.
But operating closer to your customers also cuts the legs out from Wal-Mart.
But Whole Foods also, is very profitable.