The takeover of Whole Foods by Amazon was approved this week, and we’re told that by Monday we could be seeing some big changes in the whole grocery business. This has occasioned an awful lot of clothes-rending on the internet, and even Robert Reich (who I normally respect) has weighed in on what a terrible thing this is. Now Reich is a brilliant guy, and I’ve never been Secretary of Labor (although I’m pretty confident I could do a better job than the current incumbent), so I’m only going to argue here out of my own experience. I think the picture is actually more nuanced than that. So, here’s my take on some of the most prevalent commentary.
Amazon will monolithically rule the entire world of commerce. In my lifetime, just thinking about the grocery business, I’ve seen purchasing habits go from mom and pop stores (not always the cleanest, freshest, or best stocked), to a whole bunch of grocery stores (in this area, National Tea, Jewel Tea, A&P, and later Dominicks) to only a few bigger players and larger stores (Jewel & Dominicks). There once were some pretty seedy little health food stores that smelled strongly of carob and fermenting apples. I, personally, was thrilled when about 20 years ago a now pint-sized Wild Oats opened in Evanston—such a difference in quality! Bigger national players bought regional chains (Jewel has been sold countless times, Dominicks went kaput, and Roundy’s just bought Mariano’s). Even in health food stores, Wild Oats bought People’s Market, Whole Foods bought Wild Oats, etc. At the same time, I’ve seen more boutique specialty stores open (and close)—Fresh Fields, Fresh Market, Valli’s produce.
I do think I’ve seen a startup->buyout->behemoth in virtually all retail, and eventually there seem to be boutique spinoffs to serve special needs. Even within the organic foods market, smaller producers are routinely sold to larger entities. Applegate is owned by Hormel, for example. If you’ve ever tried to produce a product, eventually you reach the limits of scalability—you have to buy in larger quantities, or manufacture and distribute more efficiently, or compete not only on quality but also price or go out of business as the founders get old or exhausted. The big fish with the better supply chain and distribution network take over. For now, Amazon is the best game around, and I don’t know anyone who hasn’t shopped with them.
Amazon will force everyone to shop with it. Let’s think about why Amazon is such a success so far. Because they have things, and can get it to you fast. Example: I needed a $3.00 item, a new roller switch for a lamp—this is about the level of electrical repair I thought I could handle. Went to Lowe’s—nothing. Went to Home Depot—had one, but it turned out to be the wrong size, and that was all that was available. Went to locally owned Ace Hardware to get some personalized advice. Sent me home with another one—also the wrong size (same as the one Home Depot sold me, so much for advice). Went to a local electrical supply outlet, which turned out to be shut down. Went to a lamp and lighting store—they didn’t carry parts. These excursions took the better part of 3 afternoons, and I still didn’t have the part. And guess where I found exactly the right thing? A five pack for $10, delivered free.
From my perspective, the chief reason I order from Amazon is that I can find what I want without chasing all over town, and it will be in stock. I’d like to have that kind of reliability locally, but I don’t. And for about the past year, Whole Foods has been woefully understocked—we waited 6 weeks for crunchy house brand peanut butter. Years ago, Barnes and Noble was a thrilling improvement to places like Kroch & Brentano’s, but B&N has nowhere near the selection that Amazon offers.
However, two of my favorite independents: Bookends & Beginnins in Evanston and the Seminary Co-op in Hyde Park, do a far better job of peddling interesting titles I would never discover on Amazon. Farmer’s markets, gourmet specialty stores, and single product shops (like the Spice House) might be the food purveyor counterpart.
Amazon will jack up prices. Certainly a possibility, but it didn’t happen yet in the book world. Amazon, even after years, is still the lowest price in the book trade. In my view, Amazon still competes very strongly on price and selection.
The deal only benefits shareholders. Okay, I admit, I’m one of those shareholders, of Whole Foods. I’ve owned it forever for two terrible reasons: I have liked shopping there (even though I think it’s drastically deteriorated over the past year), and I kept hoping it would “come back” stock price wise. This idea of the greedy corporate octopus that doesn’t care about anybody but (rich) shareholders has me a bit bemused. Because it’s extremely likely that those (rich) shareholders are YOU! If you have any money at all invested in stock mutual funds—S&P 500 funds, Target Retirement funds, even specialties like the Fidelity Contrafund or Parnassus—you own at least Whole Foods and in most cases, Amazon. Many people with 401ks or other workplace retirement plans have no idea what they actually own, and just want the value to go up. How on earth can value go up if companies don’t keep an eye on profits?
And the one I’m ACTUALLY really worried about, but no one else seems to be: The merger will result in loss of community. One of the main ways I get out of the house and see my neighbors is at the grocery store. I see community events posted. Whole Foods used to offer talks, charity events, demos by local producers, and classes. Those have slowly disappeared in the past year, but I did still have a chance to chat with random strangers, the regular store staff, and there was somebody to complain to and voice concerns about products. Now it seems we’re moving to a society where we’re holed up in our individual homes, potentially ministered to by drones and robo-communications, and it’s dang hard to raise anyone to attend a club meeting anymore.
Independent bookstores and cafes are actually stepping up to this role, but it’s only a very small and elite subsection of the neighborhood that actually attends these events. But we are increasingly losing the agora, and I don’t know how you quantify the value of that.