Why Amazon's Acquisition of Whole Foods Matters for Startupland
Amazon's acquisition of Whole Foods is notable for many reasons. Of course, there's the magnitude $13.7B. The second is the shockwaves reverberating through the grocery industry. Costco fell 10% and Kroger almost 25% on the news. Third, the acquisition underscores the importance of physical retail even to the largest American ecommerce giant. Those are all remarkable in their own right.
However, the most interesting part of this acquisition is that it marks the current apotheosis of technology's impact in the broader economy. In the last 18 months, non-traditional tech acquirers changed the M&A landscape for startups. Walmart, Unilever, GM, Ford spent billions of dollars collectively to acquire Jet, Bonobos, Dollar Shave Club, Cruise, and Chariot. That's all fine and expected.
But, Amazon's acquisition of Whole Foods is the reverse: a leading technology company buying a leader of a traditional industry. That might not seem like an important distinction, but it is.
Five of the top ten most valuable companies in America are technology companies: Apple, Amazon, Google, Microsoft and Facebook. Exxon, Berkshire Hathaway, GE, JPMC and Johnson & Johnson fill out the list. The more than $250B on their collective balance sheets implies very few acquisition targets are out of their reach. And if the ripples from the Amazon/Whole Foods merger are any indication, technology initiated M&A of traditional industries has the power to upend the status quo.
How would the world change if Apple bought Tesla to pursue the automotive industry? Or if Facebook bought Citibank to create the next generation mobile bank serving a billion people? Tack on a major global mobile phone carrier, and the social network might replicate M-Pesa's or WeChat's social success globally. Would Google acquire Salesforce, and in one fell swoop, add another $8B in annual revenue, add an enormous enterprise salesforce, and develop a global leading software business? Salesforce might be less of a traditional business, but the impact to the software world would be just as disruptive.
Amazon's acquisition of Whole Foods could be the first of several major transactions in which leading technology companies redefine traditional industries by leveraging their near-infinite balance sheets and injecting rapidly advancing technologies or unique distribution that incumbents simply can't match.
If the trend does continue, these major acquisitions will create quite a bit of volatility and uncertainty - great conditions for fast-moving startups to develop and seize the new opportunities that will inevitably crop up to compete with tech/traditional conglomerates.
Customer Master Data Expert at METRO AG
7 年It might be true that it is a disruption to a retail market. But we have to broaden our perception about this I think. This example of such big acquisition implies that everything could change in a stroke and nothing remains the same. I think this acquisition is a win-win for both of the companies, as WF was bleeding about their supply chain and pressures coming from their investors. It's a perfect match for amazon to buy WF. This way, amazon could expand its reach to every customer, and they didn't even have to fire all WF employees. By implementing click and collect business model they literally reduce their lead time with this distribution chain. And if Amazon wouldn't, trust me, some other big company would acquire WF.
Salesforce Project / Program Manager - Available for my next opportunity
7 年The advantage that ecommerce was supposed to have over bricks and mortar stores was lower expenses as high mall rents were avoided. In order to keep clients satisfied Amazaon now has many distribution ceters and now with Whole Foods will have expensive locations. In addition they are shipping products to individuals rather than having individuals come to a location and pick up many items at once. It sounds like Amazon is undermining its own advantages. Meanwhile Costco and Walmart have been perfecting their models for years.
Heard an 'expert' this morning saying this might stick a fork, so to speak, in the complete meal home delivery services like Blue Apron, Terra's Kitchen, and others...which were/are all startups. It's like literally everything else: change is going to damage some things, create opportunities for others.
Technology & Digital Transformation Executive | CTO at Leading Mexican Consulting Firm | Strategic M&A Integration Leader | Business Intelligence Entrepreneur | $10M+ Digital Transformation Program Director
7 年Ejemplo de visión y una vocación totalmente disruptiva, me parece que este es el verdadero espíritu de la transformación digital y uno de los primeros vistazos hacia el futuro próximo.
Tarquin Glavimans omgggg