Why Is Amazon Buying Whole Foods?

Why is Amazon buying Whole Foods? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by John Hwang, worked at Goldman Sachs, on Quora:

Sometimes, the best defense is offense.

Everything Amazon does is to make the Flywheel spin faster.

By buying Whole Foods, Amazon nominally gets:

• 431 stores in prime retail space in affluent areas, nationwide, for just ~ $32 million per store.
• Whole Food’s relationship with local and nationwide suppliers of organic, fresh produce.
• Brand equity of Whole Foods with middle, upper-middle, and upper class consumers.
• Nationwide distribution, fulfillment center network optimized for groceries.
• Staff experienced in running high end groceries.
• … and other valuables in the balance sheet.

But the above gets you to spin the Amazon Flywheel even faster:

• Faster Delivery: Near-instant expansion of Amazon Fresh and Prime Now - if Amazon chooses so. They can leverage the local FC network that Whole Foods already has.
• Better Selection: Whole Foods’ unique and exclusive supplier and vendor network, now available on iOS and Android.
• Lower Prices: Apply Amazon’s technology investments in checkout experience (e.g. Amazon Go) onto lagging brick and mortar experiences.

This works because of the following factors:

• The significant demographic overlap between Whole Foods shoppers and Amazon Prime members.
• Amazon’s desire to build businesses on top of on-demand, 1 day delivery supply chain (Amazon Fresh, Amazon Prime).
• Amazon’s efforts in applying technology innovations to improve on and offline shopping experiences, and bettering grocery margins.
• Offensive and defensive move against local and regional grocery delivery aggregators as well as traditional brick and mortar players trying to go online.

This question originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:

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