Amazon, Whole Foods, and iPhones
(First published on 6/30/17 on 5ish Links, my newsletter)
On the verge of the 4th of July holiday, I thought I’d take the opportunity to round up some of the best takes I read about the Amazon/Whole Foods deal a couple weeks back. And to post a few links about the iPhone’s 10th anniversary yesterday.
Happy 4th everyone!
Alex Eule and Andrew Bary:
On paper, it’s just a midsize merger. If Amazon.com’s $13.7 billion deal for Whole Foods Market goes through unchanged, it will rank as the №4 U.S. retail deal, according to Thomson Reuters, behind an uninspiring list that includes Supervalu-Albertsons, Walgreens-Rite-Aid, and Kmart-Sears.
But Wall Street wasn’t thinking much about dollars and cents on Friday. Instead, Amazon’s surprising Whole Foods acquisition had investors doing a rapid assessment of retail’s future. Shares of companies seen as suddenly more vulnerable to the Amazon juggernaut got hammered.
Also, let’s not forget: Whole Foods did $15.7B in sales last year…
But for Bezos, wounded assets in important or growing business categories aren’t challenges to be avoided. They are puzzles to be solved. (See: The Post, Washington.) Grocery is an $800 billion market in the U.S., still largely untouched by the internet and resistant to change. Whole Foods itself has a well-established brand and high-income demographic that maps well to Amazon’s own customer base, and in particular its Amazon Prime subscription service, with an estimated 80 million members.
“Your crisis is my opportunity.” Okay, that’s not exactly how that quote goes… Close enough.
This is the key to understanding the purchase of Whole Foods: to the outside it may seem that Amazon is buying a retailer. The truth, though, is that Amazon is buying a customer — the first-and-best customer that will instantly bring its grocery efforts to scale.
Today, all of the logistics that go into a Whole Foods store are for the purpose of stocking physical shelves: the entire operation is integrated. What I expect Amazon to do over the next few years is transform the Whole Foods supply chain into a service architecture based on primitives: meat, fruit, vegetables, baked goods, non-perishables (Whole Foods’ outsized reliance on store brands is something that I’m sure was very attractive to Amazon). What will make this massive investment worth it, though, is that there will be a guaranteed customer: Whole Foods Markets.
And I suspect we’ll see them repeat this playbook elsewhere, in other markets that interest them…
Andrew Ross Sorkin:
The model begins like this: A company that is successful in one area turns itself into a conglomerate by using its free cash flow to finance the development or acquisition of businesses in other areas — at first, ones that are similar to their current business, and later often ones that are farther afield. And then the company does this again and again.
When such an economic machine works, it works extraordinarily well. But when any one of the major levers in the machine breaks or even stalls, the entire enterprise comes under pressure. Shareholders start complaining that the sum of the parts would be worth more separately than together.
All stars one day fade and fizzle. But with Amazon, maybe even more so than any of its tech brethren, you have to wonder how much is predicated around Bezos himself? Even Apple, post-Jobs, has made it work and soared to new heights, at least fiscally. If/when Bezos ever steps down, does the next leader of Amazon turn down the spend and start to milk the profits? Does the whole machine start to fall apart without the brilliant financial masterstrokes of Bezos? Is that when “Day 2” starts? Entirely unclear.
The iPhone at 10
David Pogue rounds up Steven Levy,Ed Baig, and Walt Mossberg to talk about what it was like to be the only four people on the planet chosen to review the initial iPhone, released 10 years ago yesterday, ahead of time.
Speaking of Steven Levy, here’s his look back at the Day of iPhone:
In mid-June, Apple came to my Newsweek office to set up my review unit, with warnings that I had to be discreet in my public usage, as the veil of secrecy was still under effect. A couple of days later, I went on a day trip to Pittsburgh. Because I wasn’t planning to stay overnight, I didn’t take my laptop — just the phone. But a thunderstorm canceled all the evening flights, and I was stuck in Western Pennsylvania. But I had my iPhone! For 24 hours, I was able to dispatch the essential tasks of my digital life with this pocket-size computer. And I had the lede for my review.
The craziest moment came when I was doing a live Fox News interview on launch day, June 29, in front of Apple’s 59th Street store, where the line circled the block. The camera had barely starting rolling when someone slipped behind us, reached in and grabbed…not the iPhone, but the reporter’s microphone. The culprit dashed off, but a soundman tackled him, holding him down until the cops arrived. All of this was broadcast live, and, for all the viewers knew, total bedlam had broken out on Fifth Avenue. Fox cut the feed and returned to the studio, where two hosts tried to make sense of what they had seen. After a couple of minutes, we regrouped and resumed the interview. A year later I ran into the reporter and she told me, citing a junior version of PTSD, that she still couldn’t bring herself to buy an iPhone.
This really did happen. And there’s video. Awesome.
And, of course, what would a big Apple anniversary be without a link to John Gruber:
Ten years ago today, the iPhone went on sale.
I almost never watch an Apple keynote event after it has faded from being new. But I’ve watched the iPhone introduction at least half a dozen times over the years. I still get excited. The words Jobs used, as quoted above, are perfect. But you really have to watch it, to listen to his voice, to feel his conviction. He knew then what we all know now: this was it. This was the keynote we had all been waiting for. This was the reason why people lined up overnight for Apple keynotes — in the hopes of an announcement like this one. The iPhone was the product Apple had been founded to create — the epitome of everything both of Apple’s founding Steves stood for and obsessed about. The home run of all home runs.
With hindsight, though, I think even Jobs himself underestimated what the iPhone was.
The Apple I, the Apple II, the Macintosh, the iPod — yes, these were all industry-changing products. The iPhone never would have happened without each of them. But the iPhone wasn’t merely industry-changing. It wasn’t merely multi-industry-changing. It wasn’t merely many-industry-changing.
The iPhone changed the world.
Awesome photos of our litter on Mars 😜.
Amazing use case for Slack.
Those of us living in San Francisco, after years of construction, are closer to this reality. And it does look pretty great — the elevated park in particular.
I both can’t believe they haven’t done this before, and can’t believe they’re doing it. A brave new world of monetization, I guess.
After 21 years — !!! — running sites like Search Engine Land and conferences like SMX, Danny Sullivan is taking a step back to figure out what’s next. Danny was one of the first bloggers I encountered who truly showcased that you could do this for a living. What an amazing run.
Hedging Sonic the Hedgehog
Thinking about retro gaming in the age of app stores…