Here’s my five-step prediction for Amazon now that it has agreed to buy Whole Foods Market for about $13.7 billion:
• Whole Foods will expand its inventory, offering products that its target demographic is known to buy at its 400 stores.
• Whole Foods will dramatically undercut competitor pricing on those new products.
• Competitors who specialize in those products will be forced out.
• The prices of those items will go back up.
• Amazon will continue expanding its storefronts, making checkout-free Amazon Go stores a mainstream reality for the first time. (An Amazon Go store has already opened in Seattle, powered by machine learning technology that replaces human cashiers.)
Amazon isn’t hard to predict if you follow the company’s machinations. The strategy has always been to earn market share at the cost of profit, and then innovate to peak efficiency, regardless of the human cost. Once you’ve obliterated the competition, you can charge whatever you want. Once you’ve replaced people with robots, you have new leverage to keep human salaries low.
Which brings me to the next prediction:
• Amazon’s technology will continue to outpace our regulatory capabilities, and CEO Jeff Bezos may well ascend to become the most powerful man in America. The only problem is that no one will have elected him.
Amazon’s power grab is already largely cemented. When Amazon wants to buy you, you don’t have much of a choice but to sell. The quintessential example is Amazon’s shakedown and eventual acquisition of Quidsi, the parent company of Diapers.com. When the company rebuffed Amazon’s advances to sell, a funny thing happened. Amazon began selling diapers and baby products for 30 percent less than whatever the price was on Diapers.com. Amazon pricing bots were on the case, programmed to ensure Amazon products always cost less. As revenue sank, Quidsi eventually agreed to a $540 million buyout.
Did Whole Foods really want to risk a similar shakedown? Amazon was already seeking to expand its AmazonFresh grocery gambit. One way or another, Amazon was going to eat the supermarket industry. That’s not to say that this deal wasn’t of great benefit to the 39-year-old grocery chain, having reported six consecutive quarters of declining sales in April.
Now consumers and businesses have a decision to make. Resist Amazon and be eaten, or find a way to get on board.
“Our goal with Amazon Prime, make no mistake, is to make sure that if you are not a Prime member, you are being irresponsible,” Bezos said last year, a chilling statement, no matter whether you’re into free market principles or on the other end of the spectrum.
Make no mistake that we’re witnessing the lengthiest and largest hostile takeover in history. But the target isn’t a company. It’s the entire American retail sector.
We now have no one to blame but ourselves.
The old economy — everyone who doesn’t innovate — has been given plenty of warning and plenty of time to respond. Nearly everyone chose to spin their wheels, keeping store concepts the same, resisting online sales and denying where the world was headed. Lawmakers shrugged off pleadings for relief for Main Street. It was much easier to pander and grab headlines with plastic bag bans and small-business weekends than it was to be a Sherpa for the mom and pop shops that don’t have much clout.
So Phase II of the Great Amazon Takeover has commenced, and it’s the consumption of brick-and-mortar retail. If you want more evidence: Amazon is opening book stores to replace the ones it drove out of business a decade ago. And we can all either get on board or get eaten.