I have been trying to figure out the business case for Amazon buying Whole Foods. Since Whole Foods is basically a luxury food store, charging the highest of prices, and Amazon is trying to be a low-cost e-commerce platform, the buyout did not make sense.
Until I read this article. Amazon can continue to charge the absurd prices that Whole Foods is charging, and, as a benefit, add delivery one-hour to the offering. This will slightly lower the margins that Whole Foods currently has, unless Amazon charges a delivery fee to cover the margin loss.
As a comparison, Uber Eats charges $6 to deliver a $6 McDonald’s meal. It seems that people are paying $12 for a $6 meal because it is convenient. If Amazon can deliver your groceries for you, I believe many people will pay the premium prices for this convenience.
I am JeeMoney, however. I would rather spend 20 minutes spending 50% less to buy the same stuff. People put a value on everything differently, and I look at it as a 100% return on my capital in 20 minutes of labor (and an good excuse to get out of the house).
When you invest in the stock market, you expect 100% returns in about 6 years, so shopping for myself is a great investment for me.
With its deal for Whole Foods, Amazon will be within an hour drive of 70% of Americans.
Source: Amazon and Whole Foods: How 2-Day Shipping Could Become an Hour or Less – Barron’s
