Why would Amazon, an online retailer, spend 14 billion dollars to buy the Whole Foods grocery chain? To understand why, you have to understand Jeff Bezos.
Jeff Bezos is like the non-violent Ghengis Khan of the entrepreneur world. He’s both powerful and ruthless. Except, he seems to leave a trail of better-off people in his wake (unlike the real Ghengis Khan).
Amazon’s purchase of Whole Foods, and today’s news that he’s slashing prices, is not surprising for those who understand Jeff Bezos.
This is a guy who once offered to buy Diapers.com and then viciously undercut them when they turned down his offer.
In other words, Bezos was willing to lose millions of dollars a month to launch his own diaper line at Amazon and put Diapers.com out of business (go ahead, click that link and see what happens).
Why? Because he wanted to own the diaper business.
Note that I didn’t say, “He wanted to be in the diaper business.” Jeff Bezos doesn’t want to be *in* any business. He wants to own whatever business he’s in. And he’s willing to take big risks in order to make that happen.
The same is true of his desire to own the grocery business. Jeff doesn’t just want in. He spent 14 billion dollars on Whole Foods and now he’s going to slash prices to start undercutting the current players.
While many people will point to this strategy and say, “This is what’s wrong with Capitalism,” it’s hard to argue against it.
Most people will say that “evil corporations” like Amazon will undercut their competitors, create a monopoly, and then rake everyone over the coals.
That doesn’t appear to be playing out in real life, though. Diapers.com is gone and Amazon is still selling Pampers Swaddlers Diapers for $2 less than Walmart.
How many parents and families benefited from super cheap diapers while Amazon was busy undercutting Diapers.com? And how many are still benefiting?
How many will benefit from Amazon’s undercutting of traditional grocery chains while they work to become the grocery leader?
And listen, Whole Foods was already struggling. They were already looking for a way out. This sale saves a lot of jobs and gives Amazon a great platform for expanding into other areas.
Bezos isn’t just looking to own the grocery market, he’s likely looking to revolutionize it. How we purchase and receive groceries is about to change.
Whole Foods is a pet project in a world where Bezos is playing Chess while everyone else is playing Checkers.
Take a look at this tweet:
Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.
For years, Walmart has been trying to catch up with Amazon. Moves like this are why that will never happen. Amazon is able to do what Walmart does faster than Walmart is able to do what Amazon does.
For the consumer, all this means is lower prices and more convenience. This is exactly what market competition results in.
Just a few years ago people were complaining that Whole Foods was only for privileged people. Now Amazon, a company that those same complainers likely despise, is turning Whole Foods into a place anyone can shop at.
Why did Amazon buy Whole Foods? To expand their empire. And I’m struggling to see anything wrong with that.