[Cog]

To answer your question pstarr. I think Amazon is stupid by doing brick and mortar just as you alluded to. But its irrelevant of what makes sense. All that matter is stock price.

Amazon has a P/E of 185.06 and pays no dividend Stock up strong
Krogers has a P/E of 10.87 and pays a 2.15% dividend and has been down 30% in two days.

Does any of this makes sense? Nope. But all that really matters is the churn of stock price and the hype. The market can be irrational longer than you can remain solvent.

[Cog]

To answer your question pstarr. I think Amazon is stupid by doing brick and mortar just as you alluded to. But its irrelevant of what makes sense. All that matter is stock price.

All that matters is stock prices? No, it includes your analysis of fundementals to judge movement. Or do you play the market like you tweet . . . 144 character sound bites. lol

I don't care about fundamentals unless I'm going long on a stock. Movement up or down is how you make money in the market. Regardless of the underlying valuation.

You should be shorting every single oil company right now pstarr. Doesn't the ETP model tell you that they are all going down?

[mmasters]

I think amazon should have bought kroger, it has more stuff people want.

[Shaved Monkey]

Amazon is setting up in Australia and part of it is going to be Amazon Fresh grocery

Apparently Australians dont do a lot of grocery shopping online.
So its a strange one
I want to see the fruit veg and the meat not have it randomly packaged by a pimply kid who has no idea.
I imagine for whole foods most of it is pre-packaged branded stuff people are familiar with.
I buy my wine online and its delivered to my door for free,and its a bloody steep hill
Ive got 12 dozen coming middle of next week
All my car parts and household perishables mainly come out of China from Ebay
Postage is usually free and the price is sometimes a 10th of retail in Australia
I also buy my organic heirloom seeds online from permies on Ebay
http://www.news.com.au/finance/business ... c30af2fce4

[Cog]

Aldi's sells wines too.

[jesus_of_suburbia]

I think the consensus is they are going to use this as means to expand their Amazon Go stores to a wider market. People aren't going to start buying their food online. Amazon wants them scan their phone as they enter the store, shop as they normally would, and leave without having to wait at a register.

https://youtu.be/NrmMk1Myrxc

[vox_mundi]

Just in Time, Amazon Patents Method to Prevent In-store Comparison Shopping

Amazon is perfecting a different kind of business model than we’ve traditionally known. First, crush an industry by focusing on growth instead of profit. Then, swoop in to “fix” the industry that was destroyed. Now that the online retailer is moving into the brick and mortar world, it’s trying to prevent the in-store price comparisons that have served it so well against competitors.

Following the announcement of Amazon’s massive bid to buy the Whole Foods grocery chain, the Washington Post reports that the company has patented an algorithm that’s designed to discourage “mobile window shopping.” Customers’ habit of visiting stores like Borders and checking the Amazon prices while they browse is understood to have played a major factor in Amazon’s competitive victories over the last decade, so it’s beginning to take measures to ensure that it doesn’t suffer the same fate.

The algorithm isn’t going to prevent a dedicated customer from checking out other retailers on their phones... for now. All it does is make it more difficult for any shoppers who are on the store’s wifi. The “Physical Store Online Shopping Control” patent analyzes the mobile browsing of the customer and if it determines that they are visiting a competitor’s website it will redirect them in one of a few ways. From the report:

It may block access to the competitor’s site, preventing customers from viewing comparable products from rivals. It might redirect the customer to Amazon’s own site or to other, Amazon-approved sites. It might notify an Amazon salesperson to approach the customer. Or it might send the customer’s smartphone a text message, coupon or other information designed to lure the person back into Amazon’s orbit.

Amazon is gradually pulling everyone deeper into its eco-system and playing around with throttling customer’s mobile browsing is not the greatest omen.

Amazon’s attempt to enter the smartphone market hasn’t really had much of an impact yet, but imagine if it had. Imagine if it does. Imagine the retailer building some sort of system that has control over your phone while you shop in any of its stores

[Shaved Monkey]

12 dozen bottles of wine? Or is that cases? Whoohoo

I buy vino at winedotcom. Free shipping whoohoo

Dozens
4x Rose and 8x Cab Savs

Wife and I drink about 5 bottles week (2 days alcohol free)

[KaiserJeep]

Oddly enough, the main impact of this acquisition may be on the petroleum industry.

Profits in the food industry are razor-thin as it were, the reason that Whole Foods had suffered losses in recent years had nothing to do with concept or advertizing or marketing: they were simply smaller, had many smaller suppliers to manage, and were not vertically integrated like many corporations that own the farms/ranches/orchards, the trucking companies, the food processing, and the retail stores. Once the major chains like Kroger/Albertsons/etc. had organic foods for sale, and with the advent of Trader Joe's, Whole Foods was losing market share.

But in huge swaths of urban areas and denser suburbs, when served by decent mass transit, the main reason for owning a car was to haul home the unwieldy food purchases. The average household makes 1.53 trips per week to the grocery store. Provide a viable alternative food delivery service and that frequency would drop to perhaps once per month, or special occasion cooking only - with shopping at a premium store such as Whole Foods on those occasions. Potentially, urban private vehicle ownership, already low, can fall further - perhaps by 1/2 to 2/3rds. Most of the loss would be made up in mass transit passengers who no longer need carry bulky food purchases, and patronage in Uber and like ride share services.

Potentially, this new paradigm of food delivery, in concert with ready to cook meals in the Blue Apron/Home Chef/Martha/etc. model, can save considerable time, motor fuel, and result in less food waste via spoilage.

The losers would seem to be the petroleum fuel suppliers for the most part. Then there would be erosion of food sales from Walmart (more than 3X as big as Kroger Foods) and local markets - both large chain stores and convenience markets.

It's yet another example of how the Internat is pervasively changing our lives. Here in Silicon Valley we have had integrated meal food deliveries, both raw ingredients and cooked meals, for 5-7 years. Now we are moving into "Supper Groups" where you cook once per week, but host up to a dozen neighbors - the online "Nextdoor" app is being used to administer the details of this.

In Wisconsin, the wife and I enjoyed larger scale "Supper Clubs", which feed a lot of people, and offer meals to order and reasonable prices from a somewhat reduced menu - but still have waiters, waitresses, and quality chefs. So YES you may end up next to a party of 40 or so from a senior home, but they are not a rowdy crowd. In Wisconsin, Minnesota, and nearby states, this type of dining is part of the rich Scandanavian/Germanic traditions. Now they have notched up their Supper Club competion with online menus and online group reservations.

[Plantagenet]

Oddly enough, the main impact of this acquisition may be on the petroleum industry.

Profits in the food industry are razor-thin as it were, the reason that Whole Foods had suffered losses in recent years had nothing to do with concept or advertizing or marketing: they were simply smaller, had many smaller suppliers to manage, and were not vertically integrated like many corporations that own the farms/ranches/orchards, the trucking companies, the food processing, and the retail stores. Once the major chains like Kroger/Albertsons/etc. had organic foods for sale, and with the advent of Trader Joe's, Whole Foods was losing market share.

But in huge swaths of urban areas and denser suburbs, when served by decent mass transit, the main reason for owning a car was to haul home the unwieldy food purchases. The average household makes 1.53 trips per week to the grocery store. Provide a viable alternative food delivery service and that frequency would drop to perhaps once per month, or special occasion cooking only - with shopping at a premium store such as Whole Foods on those occasions. Potentially, urban private vehicle ownership, already low, can fall further - perhaps by 1/2 to 2/3rds. Most of the loss would be made up in mass transit passengers who no longer need carry bulky food purchases, and patronage in Uber and like ride share services.

Potentially, this new paradigm of food delivery, in concert with ready to cook meals in the Blue Apron/Home Chef/Martha/etc. model, can save considerable time, motor fuel, and result in less food waste via spoilage.

The losers would seem to be the petroleum fuel suppliers for the most part. Then there would be erosion of food sales from Walmart (more than 3X as big as Kroger Foods) and local markets - both large chain stores and convenience markets.

Thats an interesting idea.

However, if that was Amazon's plan then they wouldn't have bought Whole Foods. They would've just set up huge centralized warehouses and shipped all the groceries direct to homes from the centralized warehouses, the way they do with all the rest of their merchandise.

No---this is something quite different. Amazon bought Whole Earth because they already have 431 brick and mortar Whole Earth grocery stores located across most of the USA (none here in Alaska). Amazon wants those 431 grocery stores because they are going to transition from pure internet to part internet and part bricks and mortar stores. This is their plan to out compete their main competitor---Wal Mart. Amazon is going to turn the Whole Earth Grocery stores into Amazon brick and mortar stores, just like Apple did years ago. They'll still have groceries, but Amazon will also place terminals and some physical merchandise in the stores.

The jokes is that Amazon is trying to turn themselves into Wal-Mart faster then Wal-Mart can turn themselves into Amazon.

Cheers!

[KaiserJeep]

-snip-

The jokes is that Amazon is trying to turn themselves into Wal-Mart faster then Wal-Mart can turn themselves into Amazon.

Cheers!

There may be some truth to what you say - but even if both Amazon and Walmart end up in head-to-head competition, in fact, especially if they do so, the main resultant impact is that private vehicle ownership declines further.

So the petroleum lasts longer, the balance of trade is improved, and less carbon dioxide is spewed into the air. Win-win-win, except for the automobile industry.

[Shaved Monkey]

The true competition would be Alibaba and they got into groceries.
Theres was talk of Amazon probably going to buy a small range grocery chain in Australia to utilise their warehouses but the share price doesnt reflect the rumour.
Grocery stocks tumbled today in Australia on news of Amazon getting into grocery and into Australia.
Interesting Aldi sells mainly Australian groceries online to China too.
http://www.smh.com.au/business/retail/g ... upnf0.html

[Outcast_Searcher]

Amazon could easily get some nice synergies from this.

I was reading an article yesterday about how they might encourage regular customers to pick up online deliveries from a Whole Foods location. The idea would be for Amazon to save some money (vs. small deliveries to your home), and instead they would offer the customer some incentive like discount coupons on some Whole Foods items.

Getting regular customers to buy more groceries from Amazon, increasing profits from the stores, even while increasing profits on deliveries. This is the kind of scale and synergistic thinking that has led to Amazon being so successful.

And this is just one idea. Whole Foods used to be called "Whole Paycheck". Given, as PSTARR noted, that I can buy organic from a wide variety of grocers (including Kroger), I've never darkened the doors of the place.

But if Amazon can increase traffic by offering some meaningful discounts in key areas, increasing volume, narrowing profit margins but keeping a solid profit overall, and having a platform to realize a lot of other synergies (things that may not be obvious to the peanut gallery, for example) -- this could be a very interesting purchase.

And worst case, if it doesn't work out, Amazon got a lot of good real estate, and a platform to do a lot of interesting experiments. One great thing about Amazon vs. most of US corporate business is they think relatively long term., vs. emphasizing short term profits. So such a loss would just be business as usual for Amazon as it works to find ways to grow.

Like Bezos or not, Amazon has been persistently brilliant at finding new ways to grow, which IMO, is why the PE is so high. Kroger isn't necessarily a "better deal" than Amazon, just because it's cheaper. Given management's track record, the odds of sustainable high growth rates at Kroger are near zero, so they deserve a low PE -- similar to old slow growing companies like, say, IBM (currently PE of 12.78, per Yahoo).

[Outcast_Searcher]

Amazon supposedly wants to get into selling prescription drugs.

These stores might be a great platform for testing that, for people who want to pick up their drugs locally, or want to be able to talk to a pharmacist. Or have such a pharmacist as a backup even if they do buy their long term drugs by mail.

Then, depending on how that works, Amazon could decide how to balance a local vs. mail order drug sales unit. It might well give them a leg up on the mail order only chains.

...

Also, I don't think that organic fresh food for foodies and health-focused people is a commodity, unlike things that come in a sealed box/package, books, etc. I think many people want to be able to examine and pick such food themselves, which makes transforming grocery shopping into a mail order service impractical -- at least for fresh food.

The Amazon grocery online items I noticed in recent years were NOT cheap. I have bought a few staples like sauces that are sealed, based on excellent customer reviews (could do the same from Walmart if they had a better selection of high quality fare) -- but fresh, expensive food? Even if it were offered by mail, no thanks.

I think the people flatly saying "this can't work" or "this is clearly stupid", are either biased or aren't bothering to think very hard. (That's different than saying it WILL work. Business is a risky, competitive venture. That's why you get paid well (over time) for broadly investing in the stock market (even though I now expect a chorus of doomers regaling us with tales of how terrible the stock market has been throughout the past century or so, and especially tales of how it will be from this moment on). Because. They. "Know".

Disclosure: I hold no direct investment in any retailer including Amazon, and have no plans to. I am sure I hold a LOT of various retailers indirectly via broad based stock mutual funds I hold (and almost never trade) for decades.

[Cog]

I'm not going to say that Amazon's plan won't work. But have even a minor recession where cutting down on disposable income comes into play, and this model is dead in the water. I'm not a doomer long-term but recessions are a fact of life and investors know this. People like hype and stock investors certainly aren't immune to it. SnapChat ring a bell?

But I'll bet against Amazon making money on this particular deal. Apart from stock price.

[Plantagenet]

The whole point of Amazon is that they are cheaper then their competitors and they have a better, bigger selection.

Thats the main reason why people shop at Amazon---its cheaper.

I see this clearly from up here in Alaska where just about everything up here in Alaska is more expensive then in the lower 48. But I can shop on Amazon and buy everything at lower 48 prices. And then they ship it to you for free.

After years of being ripped off by every store in Alaska, its wonderful it is to buy things and know that you aren't being ripped off. Thats the best thing for me about Amazon.

I think Amazon will take this model into the grocery business. They are going to remake Whole Foods so the groceries there are CHEAPER then at Wal Mart (and won't that shock the traditional snobby Whole Foods customer).

Just a couple of weeks ago Amazon announced it is offering discount PRIME memberships to anyone who is on government benefits---- a move to take away Wal-Marts core customers.

Amazon is aiming straight at winning over Wal-Mart's clientele---the old, the people on benefits, the immigrants, and Amazon will offer them things cheaper then at Wal-Mart----including groceries, while at the same time continuing to sell everything that everybody else needs.


Cheers!

[Outcast_Searcher]

I'm not going to say that Amazon's plan won't work. But have even a minor recession where cutting down on disposable income comes into play, and this model is dead in the water. I'm not a doomer long-term but recessions are a fact of life and investors know this. People like hype and stock investors certainly aren't immune to it. SnapChat ring a bell?

I hear you, but recessions are short term things. I don't see what a short term blip (or not) would have to do with the viability of the business model. It's not like a single typical recession will make people stop buying healthy food long term, even if the recession lasts a few years.

So are we talking long term or short term?

To me, we may well not know for a decade or even more if this deal "works" for Amazon, given all the likely parts to the overall puzzle. Again -- Amazon is a strategic business, and there are (IMO) many likely ways for them to pursue incremental profit gains, future business expansion, try new "what if?" things, etc.

Heck, at the end of the day, maybe Amazon chucks the whole thing, considers it a valuable lesson learned, uses some of the real estate for other ventures or warehousing, and sells off others, and it's overall a non-event in the scale of Amazon's revenues over time. I'm not even sure that such a result would be a failure. Amazon hasn't gotten where it has by not taking risks. Risky efforts by definition, don't always go as planned. Good businesses take them "prudently".

Why would a recession, and stock prices falling for a year or three make this deal DOA? Stock prices falling won't kill it -- not with Amazon's total finances. It would certainly delay success. I don't think Amazon cares. (Nor do I think they care much about short term shareholder complaints. They've resisted calls for realizing more short term profits, and instead continued to invest in future expansion and technology).

To me, Snapchat is something completely different, but again -- are you talking short term price as "success or failure", or are you talking about the long term viability of the business model? FB looked like a disaster, price wise, after the IPO, and since then it has apparently generally kicked ass, based on market prices. (I think Snapchat is stupid and want NOTHING to do with FB -- but I'm not a teenage girl living mostly through my smart phone).

Disclsoure: I have no direct investment in Snapchat, FB, or AMZN, never have, and have no plans to.

[Outcast_Searcher]

The whole point of Amazon is that they are cheaper then their competitors and they have a better, bigger selection.

Thats the main reason why people shop at Amazon---its cheaper.

...

Amazon is aiming straight at winning over Wal-Mart's clientele---the old, the people on benefits, the immigrants, and Amazon will offer them things cheaper then at Wal-Mart----including groceries, while at the same time continuing to sell everything that everybody else needs.

I respectfully disagree on both points.

While one attribute clearly drawing customers to Amazon is that it's "cheaper", that's far from the whole story. They're clearly NOT consistently cheaper. I buy a lot of stuff from them, and I research prices on a lot of stuff from them.

There prices are generally competitive. When you ADD that to the service speed, convenience, consistency, and the way they handle returns/problems -- then the overall package is generally a great deal (which is why I buy a lot of stuff from them).

...

On the second point (and I read this in an editorial elsewhere, but I had the same thought), if Amazon's goal from this venture were to sell cheap groceries head to head with, say, Kroger or Aldi or Walmart's grocery unit -- they would have bought Kroger or Aldi, NOT Whole Foods.

At least until recently, Whole Foods was nicknamed "whole paycheck" in many affluent consumer circles -- which is a key reason I've never been in the place.

...

Also, from my reading, Amazon will have trouble penetrating the lower middle class and especially the "poor" with offers like Amazon Prime discounts. Such people are not generally coughing up cash for annual memberships without seeing a compelling reason. After all, most of them are living paycheck to paycheck -- they're "poor" for reasons -- (i.e. planning, decisions, and income).

I'm not currently buying laptop hard drives from Amazon because of only price. If I buy organic groceries from Amazon at some point it won't be only for price. I'll be VERY surprised (but freely admit I could be wrong) if Amazon convinces me to shop for my weekly staple groceries at a Whole Foods with an Amazon smiley logo OR online, vs. shlepping to Kroger one night late when there's no crowd within the next 5 years or so. (Disclosure -- I buy more on price/convenience than because it's some highly prized organic farm raised X; so I likely buy groceries more like a "poor" person. And I do buy plenty of fresh produce.

[Plantagenet]

if Amazon's goal from this venture were to sell cheap groceries head to head with, say, Kroger or Aldi or Walmart's grocery unit -- they would have bought Kroger or Aldi, NOT Whole Foods.

At least until recently, Whole Foods was nicknamed "whole paycheck" in many affluent consumer circles -- which is a key reason I've never been in the place.

Allow me to respectfully disagree.

Wal-Mart is already moving ahead on changing the Whole Foods operating model so that it can deliver cheaper groceries---for instance they are reportedly going to lay off thousands of Whole Foods employees, reducing their labor costs and probably changing the culture there as well.

I agree with you that Amazon isn't always the absolute "cheapest"----but it is never the most expensive. The prices at Whole Foods are going to have to come down to make it competitive with Wal-Mart----and that is Amazon's goal.

Cheers!

[Outcast_Searcher]

if Amazon's goal from this venture were to sell cheap groceries head to head with, say, Kroger or Aldi or Walmart's grocery unit -- they would have bought Kroger or Aldi, NOT Whole Foods.

At least until recently, Whole Foods was nicknamed "whole paycheck" in many affluent consumer circles -- which is a key reason I've never been in the place.

Allow me to respectfully disagree.

Wal-Mart is already moving ahead on changing the Whole Foods operating model so that it can deliver cheaper groceries---for instance they are reportedly going to lay off thousands of Whole Foods employees, reducing their labor costs and probably changing the culture there as well.

I agree with you that Amazon isn't always the absolute "cheapest"----but it is never the most expensive. The prices at Whole Foods are going to have to come down to make it competitive with Wal-Mart----and that is Amazon's goal.

Cheers!

Time will tell. I'm not surprised Amazon is taking steps to lower prices at Whole Foods. Perhaps to only "half paycheck". Even at "quarter paycheck", I still don't see the "poor" and the lower middle class going out of their way to shop there, vs. buying the yellow sticker discount stuff with their card at Kroger (like I do).

Again, Amazon hasn't gotten to where it is by doing very stupid things. If all they're after is low prices -- there were a lot better ways to do it than buying a premium chain like "Whole Foods", and turning it inside out.

But that's part of what makes an economy interesting -- the pundits like you and I get to sit on the sidelines, watch changes, munch popcorn, and speculate.