What is the strategic logic behind this move?
NYT, WaPo, WSJ, Bloomberg all take the same line: this is about Amazon's expansion into brick-and-mortar retail. They need a physical footprint, knock out Instacart for delivery, accelerate Amazon Go, and so on.
But is this really Amazon's play here? Seems to me this is just the superficial and obvious rationale, and these analysts completely missed the bigger implications.
Since Amazon said they're not renaming the stores, how can this be about Amazon's brick-and-mortar expansion?
Seems more likely that Amazon's strategy is actually the opposite of this.
Instead, maybe the bigger opportunity is to "Amazonify" a good brand, good people, good merchandising and thousands of relationships with good suppliers.
Customers already trust Whole Foods and they like the assortment, but (1) only a small percentage of the population has access to a store, and (2) an even smaller percentage of the population can afford it.
What if this is about taking the Whole Foods concept online in a big way ... make it dramatically more efficient, aggressively lower prices, and deliver all this goodness to a far larger percentage of the population?
Whole Foods market share is less than 2%. Amazon could turn this $13 billion business into a $130 billion business by plugging WF into Amazon's existing apparatus for merchandising, pricing, inventory control, online sales, logistics, and direct-to-consumer delivery.
Taking WF market share up from 2% to 20% is a much bigger opportunity than going the other direction, and just using WF stores to sell Amazon's grocery assortment.
Amazon market cap went up 3.5% as of the current tick, roughly $15.5B. The market effectively rewarded AMZN for the transaction far beyond the actual $13.7B tender offer!
It means there's an opportunity cost: all other things being equal, it would cost Amazon two billion dollars in market capitalization to NOT do whatever the hell Wall Street THINKS they're going to do with Whole Foods.
Maybe the market thinks they're going to use them as bases for grocery distribution: reward, the cost of acquisition plus a bonus two billion. Maybe the market thinks they're going to gut the company, fire everybody, and then there's one less competitor for what Amazon means to do with groceries! Maybe the market thinks they'll take the existing Amazon grocery stuff and rebrand it Whole Foods and the rabble will buy into that for a time.
The point is that this money really isn't free: it's conditional on whether Amazon does what the investors think they're gonna do, with the acquisition. If Amazon fails to do that, the market capitalization can evaporate.
My own hunch is that the market thinks Amazon is super efficient and acquisitive, and that Whole Foods is weak and inefficient and misguided. As such, the expectation of greedy and amoral investors is that Amazon will take over and whip Whole Foods into shape, maybe even fire everybody and replace 'em with Amazonians, and that will make Whole Foods 'better' and justify the exercise. They certainly aren't buying into Whole Foods' 'enlightened' memes: that has no place on Wall Street.
So I'm guessing it's BECAUSE Whole Foods has been 'enlightened' that the prospect of wrecking that so motivates investors. They figure that the Amazon way is clearly the winning way, and they figure there will be a BIG difference in how things are done, and it's a difference they characterize as 'good for capital', so there's a synergistic effect that makes it 'free' for Amazon plus a bonus. And then Amazon is obligated to do what's expected of them, which I think is probably kinda predictable.
This of course pales in comparison to the 478 million outstanding shares, so, you are correct: their shares don't appreciate nearly enough from the $15 billion surge in market cap to pay for the $13.7 billion purchase. However, to say "whatever the stock does has no impact on the company" is also inaccurate.
They do not, either in theory or in practice, own the assets of the corporation while it exists.
"effectively free" is a strange label to give this.
> What if this is about taking the Whole Foods concept online in a big way ... make it dramatically more efficient, aggressively lower prices, and deliver all this goodness to a far larger percentage of the population?
Efficiency and cheapness would go against the Whole Foods brand.
For their existing customers, yes, but WF has become an aspirational brand.
What if the play is to gain a large number of less affluent customers by WF-labeling lots of inexpensive things?
Search Amazon for some commodity like corn meal, or rolled oats. There's a huge price difference between Quaker brand and Bob's Red Mill. Amazon could insert Whole Foods brand right in the middle and skim customers from both ends while maintaining handsome margins.
I don't know what this means. The WF experience has nothing to do with these things. The price (cheap or less-than-expensive) and efficiency (I think you mean availability?) aren't really important, other than they are successful in the same way Trader Joes is successful, in fewer locations.
with regards to the purchase I can imagine cobranding or in store only advertising. perhaps they can use it let people pick up orders themselves? Online grocery ordering but only where a Whole Foods store is available.
The only reason I know about Aldi is that I spent a couple of years working in Chicago (and living further out), and even there I had to drive a long ways out of my way to find an Aldi. I think I went once in the 2 years I was there.
Whole Foods is everywhere.
EDIT: apparently I was effectively wrong, different Aldis:
Sure they say that now...
It'll be interesting to see what bezos does with it for sure.
But, if your just mean billion plus dollar orgs then something like : https://en.wikipedia.org/wiki/United_Farmers_of_Alberta is an interesting comparison. Further, measuring the success of such organizations is hard especially when they are not trying to make a profit. I mean how do you measure something like the US Democratic and Republican parties?
https://en.wikipedia.org/wiki/Mondragon_Corporation
Oneida is (was) the closest US analogy I can think of, though much smaller.
There are some very successful Kibbutzim spinoffs in Israel, into 100s of millions US$ (I don't know how ownership was structured).
Are they essentially large family-run houses of commerce much like tradesmen guilds of the past?
From Agriculture To High-Tech: Meet Five Kibbutzim That Became Global Powerhouses http://nocamels.com/2016/03/successful-israeli-kibbutzim-ind...
Comparing the wikipedia sidebar shows Publix with more stores, revenue, and over twice the number of employees.
https://en.wikipedia.org/wiki/Publix https://en.wikipedia.org/wiki/Whole_Foods_Market
I'm not going near Amazon, though.
[1] https://en.wikipedia.org/wiki/Migros [2] https://en.wikipedia.org/wiki/Coop_(Switzerland)
Whole foods is a good employer IN SPITE of being capitalist.
Even Walmart has started realizing this. It turns out that when you hire unmotivated people, pay them as little as possible, screw them on medical benefits, pay them too little to get their own apartment and in general work them harder than everyone else in that job sector that you get people who don't do a good job. In the past several years, Walmart has instituted new wage plans, better medical benefits, productivity goals from corporate that are still unreasonable but not insane and they think it is worth the money.
I don't know if Amazon has learned this expensive lesson, but a business can run with high employee turnover and dissatisfaction for a long time before it catches up to them. Once it becomes apparent it is often too late to fix without losing heavily in the marketplace.
Simply put, human welfare is directly in contest with maximization of profits. This occasionally can result in being paid well—it's cheaper than hiring two people at a lower rate.
And looky there, other commenters supplied a bunch more (actual) examples. I'll throw in: The Catholic Church. The nation of Yugoslavia. What the heck: the Hell's Angels. Far outstripping Amazon's "scale" in terms of heads smacked with wooden fenceposts, that's for sure, or maybe not.
Which is my next point - adjust the "scale" appropriately (and unfortunately you left no indication RE: scale of what, whether it be dollars in sales, people involved, people served, ham sandwiches set aflame, heads smacked, or dogs painted blue) in proportion to the amount of money/wealth existing in the world at that time. in history. or to the number of people alive at that time. in history. and that'll probably turn up a bunch more examples.
There's also the question of "successful at what"? At providing for its employees/members? At serving its customers? At enriching its shareholders? At painting dogs blue?
Also we should really make passing mention of the waxing and waning support for capitalistic enterprises vs. other types of communes in various places and times. in history. Is it a valid comparison between a company like Amazon, operating in one of the most capitalism-friendly sociopolitical environments (post-Reagan America) seen in some time, vs. another type of organization operating in the same environment that doesn't support that organization or even actively suppresses it?
Your comment reflects an overabundance of confidence in things that are by no means simple or certain.
Look at airlines--exec bonuses used to include metrics such as "customer satisfaction" and today those metrics are gone and only profits count. Nothing changed with capitalism, though. It's the asshole MBAs that changed.
Just calling this out to try to counter the tendency of U.S. folks to assume that there is only one, unchanging form of capitalism. In fact, ours is increasingly a weird outlier.
Makes hard decisions easier since the union and employees can see why decisions are made.
Lest you think this makes the country uncompetitive, Germany still makes cars, and the UK (which doesn't have this legal system) has vastly de-industrialised and doesn't make cars.
The logic of trench warfare era militarism is even more depressing than the normal logic of war. It's mind-boggling to think leaders figured it was appropriate to just throw demographically significant numbers of 16-20 year old boys into a meat-grinder just to keep the machinery of colonialist industry well greased.
The unions also provide other benefits. For example, most of them own summer houses that any member can reserve to go spend a weekend away. You rarely hear the average Icelander on either side of the worker/manager divide complain about them at all. Everyone more or less views them as beneficial.
Once or twice a year they make headlines when one group of workers or another feels aggrieved and it escalates to a brief strike in some small sector of the economy, but on the whole, I don't think many Icelanders would trade their system of employment for ours.
Like so many other areas, I think the problem is that we in the US are just so very much worse at running our society and country than most other comparable countries. Look at health care. No one liked the ACA; no will will like the AHCA or whatever the Republicans pass. The problem isn't that it's impossible to do a decent job at a health care system. The problem is that we specifically suck. Put us in charge of anything, and we'll turn it into something awful that doesn't work, but provides some brief period of outsized shareholder value.
So while the EU plugs away making incremental improvements each year we keep jumping around in fits and spurts forward and backward. There is still a strong belief of American Exceptionalism even in fields where we are clearly inferior. Look at Healthcare Europe figured something out that we didn't and their is cheaper and better.
As you "scale up" in diversity, population, and geographic distribution the set of things people can agree on falls off dramatically.
Iceland has a very divisive political system at the moment. The ruling government has been a coalition of the Progressive and Independence parties, roughly the european versions of the social conservative and pro-business factions of the Republican party respectively. Though it should be said that no one in Iceland really touches quite how regressive American social conservatives are. And, of course, being (sort-of) Scandinavian, there's a massively strong Social Democrat/Pirate/Left-green contingent in the Reykjavik area that can't stand the agenda of the main ruling parties.
Iceland doesn't function because they manage to get people to agree more than Americans do. There are something like 13 political parties in an average election, and they stand in bitter opposition to one another across a huge variety of issues. Iceland functions because they make their government function anyway. Nothing about being small makes it easier for two opposing parties to somehow figure out a way to get the damned bills paid. You could replace the entire American republic with Donald Trump and Barack Obama, and we'd get no more done than we do today, because the government isn't trying to solve problems. They're trying to preserve whatever problem is most plausibly the fault of the other party.
Actually, it's 1000x.
We need new political platforms focused on consensus-based policies. Not distinguishing our groups from "the other"
Go look at the film industry, and the Writers / Directors / Screen Actors Guilds. The WGA doesn't stop screenwriters from negotiating their own terms. Do you think someone like JJ Abrams is getting paid the WGA set fees? That Tom Cruise works SAG and Equity rates? Of course not.
The point of the guilds in these industries is to set minimum standards for pay and benefits. It is designed to stop studios from exploiting people desperate to work in the industry. I majored in film and many of my classmates have gone on to work in Hollywood - I don't know anyone of them who would say their unions aren't a good thing.
Would you say that it works?
My understanding is that these unions make it more difficult for new people "desperate to work in the industry" to actually break into the industry.
That's something a worker's organization would help with, even if I don't feel like I need them in wage negotiation.
Not that I disagree that it was a huge deal, it's hard to gather greater sympathy/empathy from people that tend to make less than half of those aggrieved.
If wasn't supporting a whole raft of people who aren't my kids I could get by on 10 hours a week. Most of these people will be self sufficient in the fall. Then we will see I can get fewer hours.
Charge hourly, produce good work(actually work those hours you charge) and spend enough time learning to stay proficient in your niche of the craft. This recipe won't make you a millionaire quickly, and it won't get you a house in the bay area, but it has given me great financial freedom in the Midwest.
The few engineers who care to engage in the negotiations which yield their true market value end up making several times that of the average. Yes, some of them are exceptional engineers, but some are not, and the only real distinction is being able to find and negotiate optimal market rates for their work.
Last year I had a consulting gig in a Europe based company, with offices next to a big airport. As summer was slow anyway I'd work 30h weeks (invoicing four 7.5 hour work days) Tuesday - Thursday, and spend the other 4 days at a beach in Ibiza, Bulgaria or Cape Verde (with occasional remote login to take care of emergencies).
So if you don't want to work 40 hours, don't. I have much less sympathy for a software engineer who has better leverage than a kid who works at McDonalds and couldn't earn a living wage working 60 hours.
The fact that you could strike and not really sacrifice much; and if it failed find another job, puts you in a great position. Unions are good for protecting those that can't afford to protect themselves and are at a disatvantage. SE is not IMO a vocation that needs to organize.
The games industry disproves your theory.
I have read several stories of people leaving game deve for a nice boring job writing insurance software for more money and fewer hours. Many could be doing it the other way around, write software for a lame, but lucrative, insurance company, then make a small lifestyle business writing indie games with a few friends.
I agree there is the romantic factor in play as well. You have a lot of supply of devs and a random walk of success stories.
Most people who are super excited to make games are gamers themselves, and it seems to me that most gamers are pretty open minded. In my own research it seems to me that most indie titles that "don't suck" turn at least a modest profit. Don't suck needs to be defined objectively, but not being riddled with bugs (unless that's the point [Goat simulator, Desert Bus]), having a consistent even if primitive art style and being fun to at least some gamers is a reasonable definition.
The breakaway successes like Minecraft and Super Meat Boy should not be examples. Better example are Rovio's 50 games before Angry Birds. They made enough money to live on and make the next title while having a decent but not affluent lifestyle.
First of all, "sub-prime wages" is not a thing I've ever heard of. Absolutely nothing on Google so I'm assuming you mean below market wages, which game industry wages are by definition not.
Secondly, and perhaps most importantly, paying people what they are willing to earn does not make game studios assholes. Everyone developing software for game studios knows they could make more writing software for a bank or some YC CRUD app.
> I have read several stories of people leaving game deve for a nice boring job writing insurance software for more money and fewer hours.
With the right skills, you can leave any industry and go to any other industry and make more money. Not sure what your point is here.
Are there warts? Sure there are. Nothing is perfect.
Isn't that equally true for collective undertakings?
* Association of Educational Psychologists
* British Air Line Pilots’ Association
* FDA ("The union for senior public sector managers and professionals")
* Hospital Consultants and Specialists Association
* Prospect, the professionals' union
There are a lot more listed here: https://www.gov.uk/government/publications/public-list-of-ac...
Unions are important in many industries, including software development. You and your employer may have a good method of negotiating your pay, but that doesn't make it universal
Belittling the presumed intelligence is completely unnecessary