Decline of Macy's, Kroger's (Niles, Wellston: 2014, home, buying)

[take57]

Boom goes the dynamite.

Yeah, that was a surprise. I thought they might move into B&M organically. Obviously not. Not much more to say other than Godspeed Kroger, you just got dropped into a Vitamix blender and Jeff Bezos has the switch set to liquefy. Just spoke with my financial guy, he asked if I wanted to pick up another block of KR to bring the cost basis down. I asked him how often does catching a falling knife work out? 'fraid this one's going to be a tax write-off.

[EDIT: BTW - TechCrunch has been doing some outstanding coverage of AMZN. If you really want a taste of what KR is going against, have a look at this : https://techcrunch.com/2017/05/14/wh...ing-the-world/ ]

[Briolat21]

A quick google shows approx 450 whole foods locations in the US as of 2016.

The same quick google shows 2750 Kroger locations in the US as of 2015.

While Kroger may have closed a few locations last year (and built a few); and whole foods the same - lets just assume those numbers still stand.

While I agree that Amazon - who was already experimenting with groceries with their beta store in California (where everything adds itself to your cart, and you don't check out but your bill is deducted from your account as you leave the store) ..

So basically, instead of BUILDING a number of brick/mortar stores to take the experiment to the next level. They bought them.

Considering that Whole Foods had been in a downturn (for a couple of years now) - due to increased organic/healthy options from other grocers (the main national competition being, yes, Kroger) - it made them vulnerable to a takeover - which is what happened.

Amazon will now have 450ish stores to experiment with their grocery platform. A concern for the other retailers, yes. Especially if they don't move to invest/match new technological ideas.

But a catastrophic blow? I don't think so.

Whole foods didn't earn the moniker "whole paycheck" for no reason. If Amazon intends to stick with premium products, they will limit their customer base. If they're going to wholesale turn whole foods franchises into a value-priced retailer to compete with Walmart (undercutting Kroger and Meijer in the meantime) - that may disrupt the industry, but will also take some time.

Though no doubt Amazon (Bezos is a smart guy) has been planning something like this for at least a year and was just waiting for the right buying opportunity.

Amazon had already positioned itself to cut PRIME fees for those relying on SNAP, EBT credits..

If that is paired with the whole foods brick and mortar locations, it could drive some customers that would otherwise be shopping elsewhere, but not at current whole foods prices (SNAP benefits aren't going far at $25/lb organic free range chicken breast)

Kroger has already positioned it's click list to allow for online ordering and easy pick up of groceries, I would assume they're evaluating other options for expanding into online sales.

The biggest danger (as someone else cited) is that Amazon is happy to take a loss to drive competition out of business over the course of YEARS.

Ironically, they are then moving to fill those voids left by previous brick and mortar retailers (i.e. they killed the big book chains, and now are opening "Amazon book stores"...)

Should be interesting times ahead, but I think I'll likely be shopping for groceries at Kroger for the forseeable future.

(Else I'd have to drive 12 miles to the Amazon/Whole Foods; and why would I drive 12 miles instead of 2?)

[take57]

Originally Posted by Briolat21

A quick google shows approx 450 whole foods locations in the US as of 2016.

The same quick google shows 2750 Kroger locations in the US as of 2015.

While Kroger may have closed a few locations last year (and built a few); and whole foods the same - lets just assume those numbers still stand.

While I agree that Amazon - who was already experimenting with groceries with their beta store in California (where everything adds itself to your cart, and you don't check out but your bill is deducted from your account as you leave the store) ..

So basically, instead of BUILDING a number of brick/mortar stores to take the experiment to the next level. They bought them.

Considering that Whole Foods had been in a downturn (for a couple of years now) - due to increased organic/healthy options from other grocers (the main national competition being, yes, Kroger) - it made them vulnerable to a takeover - which is what happened.

Amazon will now have 450ish stores to experiment with their grocery platform. A concern for the other retailers, yes. Especially if they don't move to invest/match new technological ideas.

But a catastrophic blow? I don't think so.

Whole foods didn't earn the moniker "whole paycheck" for no reason. If Amazon intends to stick with premium products, they will limit their customer base. If they're going to wholesale turn whole foods franchises into a value-priced retailer to compete with Walmart (undercutting Kroger and Meijer in the meantime) - that may disrupt the industry, but will also take some time.

Though no doubt Amazon (Bezos is a smart guy) has been planning something like this for at least a year and was just waiting for the right buying opportunity.

Amazon had already positioned itself to cut PRIME fees for those relying on SNAP, EBT credits..

If that is paired with the whole foods brick and mortar locations, it could drive some customers that would otherwise be shopping elsewhere, but not at current whole foods prices (SNAP benefits aren't going far at $25/lb organic free range chicken breast)

Kroger has already positioned it's click list to allow for online ordering and easy pick up of groceries, I would assume they're evaluating other options for expanding into online sales.

The biggest danger (as someone else cited) is that Amazon is happy to take a loss to drive competition out of business over the course of YEARS.

Ironically, they are then moving to fill those voids left by previous brick and mortar retailers (i.e. they killed the big book chains, and now are opening "Amazon book stores"...)

Should be interesting times ahead, but I think I'll likely be shopping for groceries at Kroger for the forseeable future.

(Else I'd have to drive 12 miles to the Amazon/Whole Foods; and why would I drive 12 miles instead of 2?)

Good post.

I would only mention that is there any history to believe AMZN won't blow pricing out of the water like they have for any other part of their business? I suspect WF's "365" line is going to get a significant shot in the arm to counter the "Whole Paycheck" image.

Why drive 12 or 2 miles when after things are ramped up you'll just need to open your front door?

Again, really good post.

[WRnative]

Analysts seem to believe that the primary reason for this acquisition is to cordon off high-income households and to gain grocery distribution heft.

The assumption is that Amazon has decided that grocery requires a separate distribution network. Consolidating these distribution centers into the Wholesale Foods network apparently would allow much less overhead for a nascent home delivery service.

It's hard to believe that Amazon wants to abandon the cost savings realized when all consolidated orders are made by a single delivery to a household.

So, Amazon may build giga-distribution centers. I wonder how many acres such a center would require. Amazon's new Etna Township distribution center sits on 100 acres.

Amazon opens Etna Township distribution center

Euclid Square Mall, now dead, could be demolished for massive industrial project (photos) | cleveland.com

Analysts also speculate that Amazon's intent is to build smaller pick-up/grocery retail outlets, perhaps, just guessing, larger than an Aldi store but smaller than a typical grocery store.

[jmecklenborg]

Delivering groceries to homes doesn't work. Right now, we don't pay ourselves to drive to a store, spend 30 minutes throwing stuff in a cart, then drive home. We don't pay ourselves for that hour of "labor" or for the 2,000 pound machine that gets us there and back. A delivery service has to pay for the machine and for someone to do all that labor. And each stop on a route can easily take 15 minutes. So a delivery driver is only delivering to 4-6 houses per hour.


Why only 4-6? Deliver pizzas and you'll find out. Even though people have cell phones, they don't leave them on. They don't hear the doorbell because they've got headphones on. They go out on an errand even though they have a pizza coming.


Look at that Kroger parking lot with 300 cars in it. It would require at least 50 trucks and 50 drivers + 20-30 support staff to deliver all of that food to those 300 families in an hour, and probably many more.

[flashes1]

Albertsons tried to acquire Whole Foods a couple months ago. They now have to be kicking themselves by letting Amazon get it. Pure speculation on my part, but I could see Cerberus selling Albertsons to AMZN in a couple years. Their IPO has been delayed due to deflation and competitive pressures.....and the competitive pressures will only intensify in 2017 and 2018----so I could see Cerberus giving up and taking AMZN's money.


That would leave three national full grocers----KR, WMT and AMZN with Aldi, DG and Lidl fighting it out in the deep discount space.


Wegmans, Publix, and BI-LO are growing increasingly more attractive take over candidates----BI-LO's owned by a Sponsor---so they could be easily sold especially due to their struggles. The others are private---but everyone has their price.

[mimi in cinci]

Originally Posted by jmecklenborg

Delivering groceries to homes doesn't work. Right now, we don't pay ourselves to drive to a store, spend 30 minutes throwing stuff in a cart, then drive home. We don't pay ourselves for that hour of "labor" or for the 2,000 pound machine that gets us there and back. A delivery service has to pay for the machine and for someone to do all that labor. And each stop on a route can easily take 15 minutes. So a delivery driver is only delivering to 4-6 houses per hour.


Why only 4-6? Deliver pizzas and you'll find out. Even though people have cell phones, they don't leave them on. They don't hear the doorbell because they've got headphones on. They go out on an errand even though they have a pizza coming.


Look at that Kroger parking lot with 300 cars in it. It would require at least 50 trucks and 50 drivers + 20-30 support staff to deliver all of that food to those 300 families in an hour, and probably many more.

Most of this is not applicable to delivering groceries to homes. I've used Green Bean Organic delivery for years and have had no interaction with the delivery person. I place the order online at my leisure and it's delivered and left at my home in temperature controlled, reusable plastic bins. They take the empty bin when my next order comes.

[Briolat21]

An article on the buying whole foods to get the customer to come to the store and solve the "last mile" of delivery problem.

Amazon’s purchase of Whole Foods is about the last mile problem.

speculation, as it all is. But interesting.

[WRnative]

Originally Posted by Briolat21

An article on the buying whole foods to get the customer to come to the store and solve the "last mile" of delivery problem.

Amazon’s purchase of Whole Foods is about the last mile problem.

speculation, as it all is. But interesting.

Great article at that link!

When combined with the idea that AMZN also gets the Whole Foods distribution network, the deal actually makes compelling sense.

Jim Cramer, the CNBC stock guru, also imagines that AMZN will gobble up the cheap retail real estate available across the country in order to build these new centers, which may offer much more than the high price groceries sold at Whole Foods. E.g., watch out Costco, Wal-Mart and Target.

It will be fascinating to see how this plays out in coming years.

[take57]

Originally Posted by Briolat21

An article on the buying whole foods to get the customer to come to the store and solve the "last mile" of delivery problem.

Amazon’s purchase of Whole Foods is about the last mile problem.

speculation, as it all is. But interesting.

Toss this one around about the last mile:



"Johnny Cab here, you just sent a message you'd be home. Here are your groceries. If you need anything else I can run back over to Whole Foods and grab whatever you want. Have a nice day" Blurp... Buzzzzz... Jetson car sound into the night air....

(at least until they get the flying drone thing figured out)