So if you’re a Digital Product Manager and you’re looking at that Amazon purchase of Whole Foods, are you asking some questions? Such as…
- “What’s Amazon’s strategic imperative here?”
- “How might this affect my business and do I need to do anything differently?”
- “Even if this move doesn’t appear to directly impact my business, will there be cascade effects through the marketplace that will eventually change something to which I’ll need to respond?
I’ve seen a lot of digital ink spilled on the whys of the Amazon/Whole Foods deal. It makes sense for anyone working in digital to be looking at this and considering the strategic implications. And while we don’t know exactly what’s on Jeff Bezos’ mind, this article Amazon’s Whole Foods Strategy: It’s Not What You Think from Forbe’s Jason Bloomberg is the best survey of possible strategic imperatives I’ve seen yet.
There just a couple items Jason doesn’t cover that I’d add:
- Besides the probable overlap of Prime and Whole Foods customer zip codes in terms of high income and likely high Average Order Value customers, you’ve got the analytics from Grocery. Search indicates intent and something like over 40% of online shoppers now start their iterative searches for products on Amazon. And Amazon – like many retailers – can infer things about lifestyle and life stage based on register tape. Such things have been known for years of course. But Grocery is the one thing maybe missing from Amazon’s predictive analytics maw. (Though ok, yes, you can buy some of this info.) Still, for what is likely their highest value customer cohort, to know even more is likely useful.
- And here’s a maybe kind of ‘out there a bit’ thought: What are other advantages to being so local? Maybe Drones? If even faster home delivery is a goal and drone delivery is really to happen, then this might be a starting place for research. Why? Because there’s probably a lot about local that needs to get sorted out before this changes from an idea to some tests to reality. Things like more hyper local mapping, condition reporting, testing local regulatory environments and what might need to change, and more. [As an instrumented rated aircraft pilot and licensed FAA Part 107 Certified drone pilot I can tell you there’s still a lot of unknowns here. And only some practical experience in real environments is likely to work out the details.] Do I think it makes sense to put Dronipad bases on Whole Foods’ roofs across the nation? Perhaps not. But given a likely long term inherent limitation of drone capability being limited battery life, maybe.
- Of course, there’s just the warehousing issue as well. Amazon has a lot of capabilities from inventory to Amazon Web Services to LOGISTICS. It may or may not make sense to turn Whole Foods’ stockrooms into distribution centers, but… if Amazon already knows – and they do – that there’s certain collections of frequent order items happening within certain zip code clusters, then they can use this info for even faster delivery of some of these items. The volume has to be there. And there’s some minor costs of split orders; that is: another box, packing material, etc. But this stuff is just Operations math.
- What about Augmented Reality research? Virtual Reality is most often about gaming, simulation and so on. But AR will likely have more immediate real world consumer uses. Obvious uses include more business oriented things; like heads up navigation systems, equipment repair instructions and similar. But for consumers, things like retail mapping, information gathering and so on are eventual possibilities. Maybe Amazon feels it needs a place to “play” here a bit to gain some learnings, given that others might be moving ahead here. And it’s possible any real mass adoption of a wearable, (which really hasn’t happened yet), could threaten things like Alexa and similar. That would be some serious long term thinking, (and a risk of being a dry well), but it’s not as if Bezos has ever been accused of shortsightedness.
- Another interesting fact about Whole Foods is it’s national footprint. (See this article Kroger Has No Business Buying Whole Foods from Motley Fool.) While Kroger may have even more of a footprint, we maybe should go back to the upscale demographic to see why Whole Foods may have a higher value as a starting place for Amazon. Often, busting into a vertical market first and then expanding outward makes sense. That can be done by slicing your market in a variety of ways, and demographic target is certainly one of them.
What do we know for sure? We know even though the specific strategic imperatives may be be unclear, investors are betting on Bezos. Post announcement: Amazon stock up, and grocer/retailers from Costco to Kroger and more are down.
Should be interesting to watch!
And if you’re a Product Manager working in digital/retail, chances are this move by Amazon will affect you in some way. Be thinking about it. Be watching for it. You may need to figure out some strategic and tactical moves to deal with how you experience the impact.