Amazon.com Inc. has announced that it will acquire Whole Foods Market Inc. for $13.7 billion, which represents a 27% premium for shareholders of Whole Foods.
This is a stunning foray into the $800 billion grocery industry, and a massive shot over the bow of its competitors Walmart, Target, and Kroger, gouging $32 billion out of their market capital in only a few hours.
Pundits will write about how Amazon will introduce new technologies and distribution to improve the performance of Whole Foods. Other analysts will joyfully and glibly quote Joseph Schumpeter, the Austro-Hungarian economist and later Harvard professor who gave us the term “creative destruction,” the process of metamorphosis of business processes and structures. Still others may gush over new high tech channels for the distribution of leaf cabbage for kale-obsessed millennials.
Indeed, Amazon is a prime example of a company that is transforming the retail industry — where so many companies such as the Gap, J. Crew, Ralph Lauren, Macy’s, and Sears are fighting to make their business models relevant, and their products appealing to value seeking, tech savvy customers who eschew the lifestyle of previous generations.
So the question of the moment is what does this corporate signal mean?
First, it says that the so-called front office does not matter. As price competition beats down all players, what matters is timely and flawless execution by the back office, in this case a warehousing and distribution system enabled by real time IT. Insight about quality for some products also becomes irrelevant. For example, there would be no point in handling fabric to feel its quality or in interacting with a sales representative or butcher who may be an accomplished adviser or long-standing friend. Commerce therefore becomes cold and clinical — like an electron traveling at high speed.
Second, it also means that size doesn’t matter. A woman may need to buy anywhere from a size two to a size eight dress, depending upon the design. But via Amazon, any drape shape will do. There is no need to try anything on — just throw on a muumuu for a picnic, church service, or elegant dinner party. One size fits all indeed.
Third, it means that food like everything else is becoming a commodity. There is no need to view or touch splendidly displayed fruits, vegetables, and other produce. And there is no need to talk to an expert on Californian and European cheeses, since cheese may be just cheese — about as bland as whey or farina.
Even the word “gourmet” may disappear from the English language entirely, as hordes of eaters requisition their grub while safely ensconced on old corduroy sofas, their thumbs tapping digital devices furiously.
Thinking satirically, the endgame could be the slurping up of the Fortune 500 as we know it, such that there is only one company or conglomerate left standing. Imagine a corporate monopolistic colossus of “Amazon Alphabet Apple Facebook.” It would be like Argus Panoptes of ancient Greece, the imposing giant with many eyes. And after the requiem for retail, it could eupeptically ingest America — and maybe planet Earth. But ironically, Argus was put to sleep and slain by the messenger of Zeus, Hermes, whose name is an elite French luxury brand.
Europe and Asia may be slower to adopt the Amazon worldview. There, fresh food and its preparation are a way of life, a medium for social and familial interaction — and part of the culture, unlike for some devotees of Amazon who may see food as a biological need. For example, in Tuscany one can view a stuffed wild boar while talking to a venerated town butcher about cinghiale in umido.
The threat to organized commercial structures is just beginning, and there is no way or knowing where commoditization, distribution, and digital technology will take us.
But of one thing we can be sure — Savile Row should stay awake.