The impressive thing about Amazon is its relentless experimentation and push into areas beyond their “core” or, rather, what everyone else thinks their “core” is and should be. Amazon’s recent announcement to acquire Whole Foods Market is the best example of this way of thinking since the launch of Amazon Web Services in 2006 — a $3.5 billion top-line revenue business today — that Amazon built from nothing.
As an entrepreneur, the interesting and exciting thing about this deal isn’t so much Amazon’s push into the physical world but Amazon’s access to a key new capability that is challenging for Amazon and others who are known for rock bottom retail pricing at-scale:
Access to a high-end brand with loyalty — Amazon has grown primarily as a value brand. You go there to find the absolute best price with the least amount of friction. Not too dissimilar to WalMart’s value proposition, only less profitable. With the Whole Foods Market brand and distribution, Amazon could push Amazon Prime and other products into higher margin businesses. This isn’t something easy to replicate for a company like Amazon.
Of course, physical retail presence and distribution are a part of the strategy but with less than 10% (Whole Foods Market with ~400 U.S. stores / WalMart with ~5000 U.S. stores + international footprint) of the total stores WalMart has today — this is clearly only part of the story. Look forward to seeing what Amazon has in store for us.
Rod wrote this on