Amazons Purchase of Whole Foods and What is Means for the Rest of the ‘big 4’
Amazon buying whole foods is just the start of what will become a growing trend of online tech behemoths exploiting the disparity in market cap between themselves and the bricks and mortar businesses of the past.
Innovation has left many companies behind, while speculators have invested heavily in companies that have grown to such massive scale while taking heavy losses to do so. We have seen that tide turn with Amazons recent step into the black, most likely positioning them to become the world’s first true $1 Trillion enterprise.
In a world where Tesla’s value exceeds that of Ford, GM and BMW the implications are obvious.
Facebook no longer has to innovate in the social sphere to win. They can just consume Instagram for $1 Billion and cannibalise their own users while expanding their product to erode any competitors advantage or innovation.
Instagram is arguably already more important than the traditional news feed to Facebooks continued growth, influence and success.
It’s no longer enough just to innovate in a single sphere.
First, you must dominate and monopolise an initial area of expertise, then you must diversify and expand in order to amplify your influence and control.
Amazon is the king of diversification having started in books and expanded to dominate online sales. Then they launched prime and changed the game completely.
Subscription to spend even more money with them is an incredibly efficient moat.
Their venture into stores was inevitable, what will be fascinating though will be the way in which they tackle it. Whole Foods is an interesting play due to the premium prices in the store which at first glance doesn’t mesh with their cheaper than everywhere else online ethos. How Bezos makes the transition will be a case study in how historical business marries to todays and the futures.
How do Facebook, Apple and Google respond?
The most startling revelation of recent years has been their ability to kill competitors stone dead. If they try to acquire you and you don’t play ball they’ll rip off your features and launch a competing product. Instagram stories and Snapchat is the obvious comparison.
Taking that logic forward the following is most likely:
Apple will buy Netflix.
Facebook will buy Spotify.
Amazons will buy Slack.
Apple will buy Twitter.
The paradigm of business has been altered. It’s now not only a conceivable goal but almost necessity to make your mission to be acquired by one of the big four because if you don’t they will exploit their platform of hundreds of millions of people to assault you into submission.
I believe it is only a matter of time before one of these companies makes a play into public services — possibly health care. Health is arguably the biggest technological problem facing the future of humanity.
- Would a drone be faster than an ambulance?
- Will the iPhone predict heart attacks days before they occur?
- Can Facebook provide insight into mental health conditions?
With the train of innovation slowing what’s left to disrupt?
Services and Utilities.
Facebook is already the largest co-operative in the world. They have just chosen to focus their monetization strategy on advertising instead of reverse engineering the purchasing model.
Facebook could locally organise to represent the consumer to the provider. Instead of monetising by selling leads they could monetise by organising a platform of connected users to collectively bargain for lower costs for everybody.
They’d sell a subscription to the service and group-buy everything through their platform.
The question that fascinates me most in commerce is this. If Amazon is the Google for products what will become the Facebook. In foresight, the answer is obvious — Facebook.
Facebook is already organised like a Trade Union, now it must act like one or allow an arm of the company to organise consumers together. It could become the most important tool for consumers in the history of the world utilising its influence to alter the customer providers relationship forever.
Facebook has the potential to offer every single product or service directly to consumers, whether that is car insurance or electricity, holidays or homes, and you could argue that they have not been bold enough in their strategy thus far.
Having a populous of over 1 billion active users no company in the world could achieve a lower wholesale price for any product ever.
Ironically they could achieve all of the above without marking up any of the products they offer. They would simply offer products at cost with a subscription paid that would subsidise the staff required to enable it to work.
Would you pay a small subscription to purchase literally anything and everything from one source.
You probably already are with Amazon Prime.