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AMZN - Amazon.com Inc.

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awindenberger Newbie

awindenberger

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https://www.bloomberg.com/news/articles/2017-08-28/amazon-cuts-prices-at-whole-foods-as-much-as-50-on-first-day

 

At the Whole Foods on 57th Street in Manhattan, organic fuji apples were marked down to $1.99 a pound from $3.49 a pound; organic avocados went to $1.99 each from $2.79; organic rotisserie chicken fell to $9.99 each from $13.99 and the price of some bananas was slashed to 49 cents per pound from 79 cents. The items marked down had orange signs reading “Whole Foods + Amazon.” The signs listed the old price, the new price and “More to come...”.

 

While those are prices in Manhattan, those prices are still substantially HIGHER than comparable stuff in the vast hinterlands.  Rotisserie chickens at Costco & Kroger & other is $4.99 or $5.99.

 

I will say again, I think the vast majority of shoppers at WFM & SVU (WMT & KR) are different demographic groups.

 

AMZN is running the risk of "debasing" the WFM brand or cachet.  I think there is a large contingent of people who WANT to pay more for their food...they get artisinal organic vegan cracked pepper turkey for $18/lbs. and they are fine with it.  It keeps the unwashed masses out of the store...

 

AMZN very well might lose that demographic that WFM makes their money from.  Of course, that is assuming that AMZN plans to make money from the WFM acquisition.

 

They might lose some "snooty assholes," but Whole Foods will gain a lot more customers that want to eat better but couldn't afford to. My wife and I are big Whole Foods shoppers when we visit any city, and the only complaint we have is the prices. They don't stop us from going, but we would spend more if it were more affordable.

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GregS Newbie

GregS

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Seeing the Whole Foods price markdowns only underscores how overpriced they were.  Wow.  Of course the lower prices will drive traffic but it remains to be seen whether they increase cash flow.  I still suspect Amazon will take a write down on Whole Foods within the next couple of years, but that doesn't mean it can't work in the long run.

 

Seeing the Echo display makes me think this is about staking a claim to a wealthy group of consumers, through Prime, and eventually driving grocery sales through voice/Alexa and delivery.

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JayGatsby Newbie

JayGatsby

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Seeing the Whole Foods price markdowns only underscores how overpriced they were.  Wow. 

A lot of this just seems like marketing to me. Whole Foods (and every grocery store except Trader Joes) has always had sales. The prices they're advertising aren't really anything special. https://www.bloomberg.com/news/articles/2017-08-28/amazon-cuts-prices-at-whole-foods-as-much-as-50-on-first-day?cmpid=socialflow-twitter-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social

 

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fareastwarriors Newbie

fareastwarriors

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Seeing the Whole Foods price markdowns only underscores how overpriced they were.  Wow.  Of course the lower prices will drive traffic but it remains to be seen whether they increase cash flow.  I still suspect Amazon will take a write down on Whole Foods within the next couple of years, but that doesn't mean it can't work in the long run.

 

Seeing the Echo display makes me think this is about staking a claim to a wealthy group of consumers, through Prime, and eventually driving grocery sales through voice/Alexa and delivery.

 

Some items were really expensive but if you do some planning it's not That bad. I worked as a cashier for Whole Foods for 4 years. Those Manhattan prices are not reflective of all their stores elsewhere. It's like a Starbucks drink costs like $5 in Manhattan but high3/4 something in suburb.

 

 

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DTEJD1997 Newbie

DTEJD1997

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They might lose some "snooty assholes," but Whole Foods will gain a lot more customers that want to eat better but couldn't afford to. My wife and I are big Whole Foods shoppers when we visit any city, and the only complaint we have is the prices. They don't stop us from going, but we would spend more if it were more affordable.

 

Language PLEASE!  This is a klassy interwebs forum!  I don't know what it is in my poastings that prompts such vulgarities...

 

I don't want to pry too much into your personal financial situation, but what exactly is preventing you from eating healthier elsewhere? Do you live far out in the country?

 

Here in the hinterlands (Michigan), we have farmer's markets, stores specializing in produce, stores specializing in meats, baked products, imports and so on.  If you have a vehicle it is relatively easy to access these places.  We also have Costco, Sam's club, and of course many different grocers...within a 30 minute drive I can get to Kroger's(big), Wal-Mart(big), Meijer(big), Sav-A-Lot, Spartan (independent), Costco, Sam's Club, Aldi, Trader Joe's, Whole Foods, and a host of regional/local chains & independents.  We also have "ethnic" stores catering to Asian, Middle Eastern, Mexican (Latin American), Polish, Eastern European, Italian, German, Middle Eastern, etc.  I am sure I am also leaving some out, I am also sure that I do not know of some others...

 

So in my area of the country, you can get healthy food cheap outside of WFM.  Outside of some gourmet or small batch items, I can't think of anything that WFM carries that can't be gotten elsewhere.  Admittedly, WFM may have the best selection of gourmet/high end under one roof, but it most definitely can be sourced elsewhere and cheaper...

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kab60 Newbie

kab60

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This article comparing Sears & Amazon is pretty funny: https://www.theatlantic.com/business/archive/2017/09/sears-predicts-amazon/540888/?utm_source=atlfb&single_page=true

 

Todays there's a rumor out that Amazon is interested in French retailer Carrefour.

 

I think it's getting pretty silly if that's true. If they go on a B&M spending spree, I don't see why this things should trade for some 100-200 times earnings. This - combined with building another corporate HQ - makes me think they're overextending themselves and adding too much complexity to the business. I don't dare short Amazon, but I think there are some interesting plays that have been hammered by what appears to be investor expectation that Amazon will turn everything into gold and crush competitors in its wake.

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rkbabang Newbie

rkbabang

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This article comparing Sears & Amazon is pretty funny: https://www.theatlantic.com/business/archive/2017/09/sears-predicts-amazon/540888/?utm_source=atlfb&single_page=true

 

Todays there's a rumor out that Amazon is interested in French retailer Carrefour.

 

I think it's getting pretty silly if that's true. If they go on a B&M spending spree, I don't see why this things should trade for some 100-200 times earnings. This - combined with building another corporate HQ - makes me think they're overextending themselves and adding too much complexity to the business. I don't dare short Amazon, but I think there are some interesting plays that have been hammered by what appears to be investor expectation that Amazon will turn everything into gold and crush competitors in its wake.

 

Interesting article thanks.  If Amazon is going to be as successful in the 21st century as Sears in the 20th, then maybe it would be wise to go all in for the next 70 years or so.

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dyow Newbie

dyow

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Does amazon look to make a profit when they enter a new category. 

 

Historically it seems like the answer is no.  Their goal seems to be to take as much market shares as possible.

 

But i don't know, how have they approached this in the past (i.e. with electronics or other big ticket items).

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Liberty Newbie

Liberty

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Does amazon look to make a profit when they enter a new category. 

 

Historically it seems like the answer is no.  Their goal seems to be to take as much market shares as possible.

 

There's an interplay between these things. In high-fixed costs businesses, scale has a lot to do with whether you eventually make a profit or not. The scaled low cost provider get better deals from suppliers, attracts more customers, and gets operating leverage out of its expensive assets with higher inventory velocity.

 

So they try to gain scale to make profits. But then they reinvest those profits into new startups elsewhere, so it doesn't show on the aggregate numbers just yet.

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dyow Newbie

dyow

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Does amazon look to make a profit when they enter a new category. 

 

Historically it seems like the answer is no.  Their goal seems to be to take as much market shares as possible.

 

There's an interplay between these things. In high-fixed costs businesses, scale has a lot to do with whether you eventually make a profit or not. The low cost provider get better deals from suppliers, has more customers, and gets operating leverage out of its expensive assets.

 

So they try to gain scale to make profits. But then they reinvest those profits into new startups elsewhere, so it doesn't show on the aggregate numbers just yet.

 

Makes sense.  Scale, use your customer base, become the low cost provider and squeeze your vendors. 

 

Thanks. 

 

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Liberty Newbie

Liberty

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https://www.cnbc.com/2017/10/06/amazon-considering-selling-online-prescriptions-decision-coming-soon.html

 

The company will decide before Thanksgiving whether to move into selling prescription drugs online, according to an email from Amazon viewed by CNBC and a source familiar with the situation. If it decides to make that move, it will start expanding its senior team with drug supply chain experts.

 

Amazon typically spends years researching opportunities before it telegraphs its intentions. The opportunity to sell drugs online is alluring given its market size -- analysts have estimated the U.S. prescription drug market at $560 billion per year. Amazon is well aware of the complexities, say sources familiar with the company's thinking.

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JRM Newbie

JRM

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Pharmacy operators like Walgreens and CVS operate the pharmacy at close to break even, and they make their money on the sale of other things you stumble across as you walk to the back of the store to the pharmacy.  Pharmacies located in Wal-Marts or Targets typically operate at a loss, but serve the purposes of getting people in the door.  Pharmacies are expensive to operate.  You have to have licensed pharmacists (licensed on a state by state basis).  Walgreens and CVS operate at around 6% operating margins, so I'm guessing Amazon isn't interested in attacking this margin.  From what I've seen pharmacy benefit managers had higher margins about 10 years ago, but they seem to have been falling in recent years.  If anything, Walgreens may be thinking they can cut out the middle man, the PBM.  Perhaps what they mean by "transparency" in pricing means a more direct to consumer model where amazon is dealing directly with the drug manufacturers. Not sure.

 

I bet they will need to invest in a brick and mortar presence similar to the grocery business to really gain any penetration in the market.  You can't simply throw some Fentanyl in the same box as somebody's Prime Pantry order and leave it on the doorstep. 

 

I'm selfishly excited to see what happens.

 

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