Note: While SmallBusiness.com rarely covers news about mergers or acquisitions that involve large publicly-traded companies, we often cover the actions of Amazon as it both competes with, and serves as a marketplace of goods and services for small business.
In a press release today (6/16/2016), Amazon announced it is acquiring the food store chain Whole Foods. While Amazon has already transitioned to same-day delivery in many markets and is experimenting with various forms of food-related retailing, an obvious question about the merger is what it might mean for small and local food merchants.
Early small business observations regarding Amazon’s acquisition of Whole Foods
Competition is nothing new for small, local food stores
For the past three decades, competing with big box food chains has been the constant reality for small, local and family-owned markets. While some small, niche retailers (chains and individual stores) serve similar customers to those who shop at Whole Foods, the acquisition will mean little to them, because the competition already existed.
Amazon will invest in logistics and technology
Amazon will be focused on adding efficiencies to a large company that needs their muscle. Amazon won’t be focused on small, niche stores, except in ways that will likely enhance the logistics and delivery capabilities of Whole Foods-branded stores.
Whole Foods’ commitment to local sourcing won’t change
The Whole Foods brand has become synonymous with natural, sustainable and locally sourced food (and with being expensive). Amazon is not a food company (nor a book company). Amazon is a technology and logistics company. As local sourcing of food is front and center with Whole Foods’ marketing efforts, a large part of its value would disappear if Amazon attempted to re-make it. Starting with IMDB (its first acquisition) through Zappos, you’ll find few attempts by Amazon to instantly attempt to re-make brands and cultures that work.
What about all those market concepts that Amazon is trying out?
As we’ve said whenever Amazon announces or opens a concept food store, it’s not about the food, it’s about the technology and efficiency. Amazon may support efforts by the Whole Foods brand into new concepts, but the acquisition is not focused on new bricks and mortar concepts, but new ways to make its technology and logistics disrupt more industries.
Amazon is the ultimate “coopetition” company
We’ve grappled before with the question, “Is Amazon a friend of foe of small business?” And the answer is always, “yes.” If ever there was an example of the concept of “coopetition” (when two or more companies compete in some ways, but cooperate in others), Amazon and small businesses are it.
On SmallBusiness.com, we’ve observed that when it comes to certain retail niches, Amazon fiercely competes with small businesses. While in other ways (small, independent, niche bookstores, for example), it can be easily argued that Amazon’s war with big-box retailers like Barnes and Noble, created an opportunity for local bookstores. No doubt, the same is taking place with Amazon’s current battle with Walmart (and Sam’s), but Walmart won’t be as flat-footed as Barnes & Noble.
Here’s a surprise for most people, even analysts who follow Amazon: During the past year, Amazon has provided $3 billion in loans to 20,000 small businesses in an invitation-only small business loan program.
According to the company, Amazon provides small businesses access to more than 300 million active customer accounts worldwide through its various programs to allow small businesses to set up shop or use Amazon’s fulfillment service. And millions of businesses, large and small, use Amazon’s vast web services.
It is almost impossible to list all of the ways Amazon intersects with all small businesses— sometimes competing, other times cooperating. Some businesses would not exist today if Amazon’s distribution and fulfillment services didn’t exist. Amazon’s affiliate programs have been a first-step to e-commerce for others. However, Amazon has fought local sales tax laws in all 50 states, an action most bricks and mortar stores know give Amazon an unfair advantage in the sale of certain types of goods.
But it’s important to recognize opportunities among Amazon’s strategies.
As today’s announcement proves, they aren’t going away anytime soon.
VIA | Techmeme