Amazon deal will dash many startup dreams
If you faintly heard the sound of breaking bones and painful whimpers Friday morning, that was Amazon crushing the dreams of thousands of tech entrepreneurs and investors by buying Whole Foods Market.
By taking over an international grocery chain, Amazon will soon dominate the one corner of the delivery sector where it was weakest, fresh food. And that was the one corner of delivery services where smaller companies had hoped to gain a foothold.
The list of startups that offer to make your grocery store run for you is practically endless. In Houston, they include Instacart, Burpy and Shipt. Investors have put billions of dollars into these companies hoping to make money on you either being too lazy or too busy to buy your own food.
Then there are the internet meal services that send you all of the ingredients to make a meal, including the recipe. These startups include Blue Apron, Sun Basket and Home Chef. Just follow the instructions like assembling an Ikea book shelf. The prepared food kitchens at Whole Foods can easily provide
this service, too.
Then there are Whole Foods’ competitors, who have spent the last few years successfully catching up with the Austin-based company’ s lead in organic and natural food offerings. The national shift toward healthy food has taken away Whole Foods’ uniqueness and hurt same-store-sales. Many of these grocery chains have partnered with delivery services or started their own to further take market share from Whole Foods.
None of these start ups has the resources or the distribution system that an Amazon-owned Whole Foods will possess. And while some competitors will survive, most will fail because Amazon Prime is already so popular.
Then there is the question of cost. Most delivery services allow you to shop the store of your choice online. Once your order is placed, a delivery person walks up and down the aisles picking items off the shelf. That’s pretty inefficient, and it’s labor intensive. Most of these delivery services are losing money as they try to scale up.
Amazon will convert Whole Foods facilities into highly efficient Amazon ware houses, reducing the time it takes to put together an order. By using Amazon trucks currently used to deliver nonperishable packages, the new Whole Foods will get your groceries to you quicker an data lower cost.
If you are someone who likes to use Amazon, it makes perfect sense to order your groceries while you are buying a book or some other item. This is all part of Amazon’s bid to be your one-stop for all of your shopping needs.
What will perhaps be most fascinatingto watch over the next few years is how Amazon changes the corporate culture at Whole Foods, a company known for treating employees pretty well. Amazon has a dismal track record.
Perhaps the person most likely to feel crushed by the deal is Whole Foods CEO John Mac key, who started the grocery store near the University of Texas at Austin in 1980. The store he started as a rebellion against the big grocery chains and chemical ly laced foods will soon be the property of a company that will sell almost anythingas long as it is legal. Mac key, though, couldn’ t st ave off the demand soft he activist investor she called“greedy bastards” in a Texas Monthly interview. There is little chance that Whole Foods will not undergo an over haul under AmazonCEO Jeff Bez os’ direction. Mac key will likely not recognize the company in five years.
Amazon’ s purchase of Whole Foods is a reminder of why makinga wise tech investment is so difficult. There are few ideas, such as grocery delivery, that are truly proprietary. And that means a major corporation can easily bigfoot a small startup if a nascent business looks promising.
That’s what happened to dozens of delivery service companies on Friday, and a lot of people just lost a lot of money because Amazon will now dominate the sector.