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The Wall Street Journal reports that Amazon has big plans for its Whole Foods business - it wants to open stores in areas of the US where it currently does not operate, include facilities in those stores that will allow for pickup and delivery of Amazon orders, and also enable it to extend its Prime Now two-hour delivery service to new regions of the country.

It may be ambition. Or it may be defense.

The Journal story notes that this would be a reversal of Amazon’s approach since acquiring Whole Foods in 2017 for $13.5 billion, which was to slow down store growth and accelerate layoffs. “Amazon’s investments are helping to improve morale at Whole Foods after a stretch of falling sales and staff cuts,” though the story points out that “some Whole Foods workers have pushed to unionize this year for better benefits and working conditions.”

According to the Journal, “Amazon offers Prime Now, a two-hour delivery option to members of its Prime subscription service in more than 60 cities, and online grocery pickup from Whole Foods stores in as little as 30 minutes from nearly 30 cities. Amazon plans to expand those services to nearly all of its roughly 475 Whole Foods stores in the U.S., according to another person familiar with the plans. Amazon also wants to use benefits for Prime members to attract new customers to Whole Foods and draw them back more often.”

A Whole Foods build out, the story suggests, “would also intensify competition among grocers that are already fighting to retain customers. Supermarkets have been holding down prices and adding new services as consumers shift more of their shopping online. Other retailers are also widening the range of goods they sell, from discount grocers like Aldi and Lidl to pharmacy chains and convenience stores.”

It appears that Amazon may be doubling down because it has to. Bloomberg reported the other day that “the number of Amazon Prime members who shop for groceries at least once a month declined in 2018 compared with 2017, according to the results of an annual consumer survey released Wednesday by UBS analysts.” This likely is because Amazon is facing more intense competition: “A separate study by research firm Brick Meets Click found that households using grocery delivery and pickup services from physical retailers spend about $200 per month and place orders more frequently than Amazon grocery shoppers, who spend $74 a month.

“The number of households with access to online grocery delivery and pickup options will reach 90 percent next year, up from 69 percent in 2017, thanks to big investments by food retailers of all sizes, the report states.”

Of course, it isn’t like Amazon is having a bad year. Business Insider reports that “in the US, Amazon will close out the year nabbing nearly half of all online sales, according to analysis by Emarketer, up from a 43.5% in 2017. Amazon will generate $258.22 billion in online retail sales in the US by the end of the year, a staggering increase of almost 30% from the year prior.”

And CNBC reports that Amazon says that its “customers worldwide ordered more items than ever” from it during the just-completed holiday season … Amazon said tens of millions of people signed up this season for free trials or paid memberships for Amazon Prime. The company said it sold millions more of its own devices, like the Echo Dot and Fire TV Stick 4K, compared with last year. Amazon said it also sold a record number of smart home devices including the Amazon Smart Plug, Ring Video Doorbell 2 and the iRobot Roomba 690.”
KC's View:
One of the interesting insights from the Journal story is that while sales have grown at Whole Foods, profits haven’t, at least in part because of a sharper pricing policy and discount program - linked, naturally, to Prime membership. Which, when you think about it, sounds like it pretty much comes from the Amazon playbook … drive prices down, build market share, and worry about profits later.

This will be an interesting and even potentially dangerous time for Amazon. Interesting because it seems to be a company of almost endless and unquenchable ambitions, and dangerous because it is possible for even Amazon’s reach to exceed its grasp … it is placing so many bets and making so many promises that, if it does not deliver, it will create both disappointments for its customers and openings for its competition. Despite Amazon’s reported positive end-of-year results, there was some evidence of this happening during the holiday shopping season … and I think Amazon has to focus rigorously on this.

Ironically, poet Robert Browning once wrote, “Ah, but a man's reach should exceed his grasp, Or what's a heaven for?” I suspect that this would be the Jeff Bezos response … that a world in which Amazon’s reach and rasp were perfectly aligned would be one with fewer possibilities and opportunities.

Which is probably how more business leaders should think and act.