I’ve heard many times over the past few weeks that people are getting tired of dealing with the “boxes”. The “boxes” they speak of refer, of course, to their purchases from Amazon (AMZN) that greet them as they return home. I have quite a few myself that I haven’t gotten around to recycling. Robert Frost once wrote that “Nothing Gold Can Stay” and I think consumers are getting a little tired of the Amazon experience. People want constant change and want it immediately.
The common wisdom on the Amazon purchase of Whole Foods Market (WFM) is that it is their way of breaking into the perishable grocery business. I think it’s more than that.
Ninety percent of the population lives within ten miles of a Wal Mart (WMT) store. The opportunity there is to maintain their bricks and mortar experience for those that want it but also to offer same day delivery to the communities in which their employees live. It would seem reasonable for Amazon to understand that they need to have some type of physical store for people to go to and I think that the Whole Foods acquisition is just that. The grocery business is notoriously low margin and that fits with Amazon’s strategy of using these low margin businesses to get in front of more people to sell more stuff to them. I see Amazon Prime as being a competitor to the membership clubs such as Costco (COST). You pay an annual fee, thereby annuitizing more of the revenue and easily introducing new products. What if you don’t want to pay an annual fee? Well, there is always Walmart.
I suppose that the question is not whether people have changed their preference for Amazons methods. The relevant question is whether or not Amazon has correctly predicted where customers will go next.
DISCLOSURE: This article is for informational purposes only and is based on my own personal experiences. It is not intended as investment advice and should not be relied upon as such. It is not a recommendation to buy or sell any securities listed. Please consult a qualified advisor to determine the best investment plan for you.