Must-Read: Ben Thompson: Amazon’s New Customer

Must-Read: Ben Thompson: Amazon’s New Customer: “the key to understanding the purchase of Whole Foods… is that Amazon is buying a customer—the first-and-best customer that will instantly bring its grocery efforts to scale… https://stratechery.com/2017/amazons-new-customer/

…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. In the long run, physical grocery stores will be only one of the Amazon Grocery Services’ customers: obviously a home delivery service will be another, and it will be far more efficient than a company like Instacart trying to layer on top of Whole Foods’ current integrated model. I suspect… Amazon Grocery Services will be well-placed to start supplying restaurants too, gaining Amazon access to another big cut of economic activity. It is the AWS model… the key… is having a first-and-best customer able to utilize the massive investment necessary to build the service out in the first place…. Amazon has no desire to be a grocer, and contrary to conventional wisdom the company is not even a retailer. At its core Amazon is a services provider enabled—and protected—by scale…