Thursday, March 28, 2024

Amazon and Whole Foods: A New Era for ECommerce?

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Amazon’s recent acquisition of high-end food vendor Whole Foods has sent shockwaves through the ecommerce world. It’s a bold move for the online retailer, and some experts have expressed doubts as to whether it will prove to be a wise one. More than one economist has suggested that Amazon have bitten off more than they can chew.

The Final Mile 

In particular, skeptics point to “the final mile” – the last crucial steps between the actual supplier and the customer. Groceries aren’t the same as electronics, books or music. If a customer’s new iPad is held up for a couple of days at the warehouse, that’s a minor delay and will probably not affect the purchaser’s experience. If a gallon of milk gets held up, it’s no longer saleable. More to the point, the customer is likely to make their purchase elsewhere –  not just on this occasion, but in future. The theoretical convenience of Amazon’s online ordering is offset by the logistical problems of supplying perishable goods.

Stiff Competition

Another issue is that many stores already offer online grocery shopping, and have proven very effective at providing this kind of service. In the US — perhaps Amazon’s largest potential market — Walmart has invested significantly in its online grocery shopping services. Amazon faces stiff competition from Instacart, an online shopping service that works closely with local stores to supply same-day deliveries to meet its customers’ needs. Amazon will need to replicate and supersede this established and thriving service in order to compete.

Other experts, however, take a more positive view. Kenneth Sanford, an expert in data science and an adjunct professor at Boston College, argues that the acquisition of Whole Foods puts Amazon in an unparalleled position to leverage its mastery of data collection and interpretation to provide unique new kinds of ecommerce experiences to its users. Amazon already has a staggering amount of user data to draw on – especially since the advent of its digital assistant, Alexa. By pooling this information with the extensive consumer data held by Whole Foods, Amazon can anticipate customers’ needs and step in to fulfill them.

Small-scale ecommerce entrepreneurs should observe the unfolding situation with interest. While not everyone can hope to be the next Jeff Bezos, there are likely to be lessons for us all in the ways that Amazon navigates its new market role.

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