Why Amazon.com Just Bought Whole Foods and What That Means for Drupal
Opportunities for Drupal from a mega merger of Drupal community companies.
Two of the biggest retailers in the world are getting together. This morning, Amazon.com, the juggernaut that continues to put massive pressure on brick-and-mortar retailers, announced that it is buying Whole Foods, the popular, high-end organic foods grocer.
Both companies are major stakeholders in the Drupal ecosystem: Amazon made an investment in Acquia in 2014, and much of Acquia’s hosting infrastructure relies on Amazon Web Services. Whole Foods, for its part, has used Drupal for its web presence for at least five years—if not much longer—and holds Acquia as a key partner. Acquia Drupal is a significant part of the Whole Foods DevOps story. (I can just imagine that email from the Whole Foods Accounts Payables department to Acquia: “Send the bill to Amazon.”)
From a presentation at an Acquia event:
So why would Amazon jump out and make this purchase? The answer is complex and multi-faceted.
For Amazon, it's all about the data.
First, Amazon is, at its core, a data company. They use shopping history and patterns to sell us things we need before we even know that we need them. With all the newly acquired data from Whole Foods upper-end clientele, Amazon can make more efficient stock decisions in both the retail and physical stores. In February, Whole Foods Chief Executive John Mackey said that they would retain the services of Dunnhumby, a customer data and insights company, to inform merchandising and services (in other words, help us stock our shelves and get our prices down). I can’t help but think that Amazon could do even better.
Second, this acquisition gives Amazon access to a grocery distribution network that enhances their own. It creates more markets for home grocery delivery. Nomura Instinet analyst Anthony DiClemente recently said that the grocery industry remains one of the largest and most under-penetrated markets for Amazon. Well, that just changed.
How convenient could Whole Foods home delivery be? As Dries has demonstrated in recent keynotes (blog post: http://buytaert.net/cross-channel-user-experiences-with-drupal), I can envision a future where I ask my Echo Dot for some free-range chickpeas and organic shampoo and a Whole Foods van shows up at my door an hour or two later with my products (and as of today, with a sizable charge on my debit card).
The Whole Foods brand - a trip down memory lane
Third, it gives Amazon a very strong brand that is associated with organic groceries and high-end shopping experience.
I’m from Austin, and I’ve been shopping at Whole Foods since there was a single store in the early 80s. My family lived in nearby Temple so once a month we’d drive to Austin so Mom could shop at Whole Foods while us kids ran around the nearby Book Stop (Look it up. It was ahead of its time.), and eat at a fancy restaurant called Chilis.
So, maybe my brand recognition and a lifelong love of the grocery chain is stronger than most. There's no denying that it looms large over the health-food industry and is super-popular with upper-middle class soccer moms and those avocado-on-toast loving millennials we hear so much about (joke). How will Amazon leverage that loyalty? Could we see Amazon Fresh become “Whole Foods from Amazon”?
It's Go time.
The fourth and perhaps most compelling upside for the acquisition lies with Amazon Go, a recent experiment with automated retail stores.
Go is a frictionless shopping and checkout experience for physical stores. According to their website, you just “browse and shop like you would at any other store. Then you’re on the way: no lines, no checkout.”
It's currently only open to Amazon employees in a single Seattle store but the idea is as simple as the implementation is complicated: use advanced scanners and trackers to automate checkout. But what does this do to labor cost? In their commercial, the lone store employee is making sandwiches. That's hyperbole, but it makes that point: this is what Amazon wants. Any labor that doesn’t directly enhance the customer experience is suspect and should be eliminated as soon as possible.
Yesterday, outgoing CEO of GE Jeff Immelt scoffed that robots were not going to take over factory jobs in the next five years. Perhaps, but in retail, it has already begun. Many retailers from grocery stores to Home Depot offer self-checkout. If Amazon leads the way to friction-free checkout in supermarkets, retailers that do not follow in their footsteps will find that they’re the next Borders, CompUSA, or Radio Shack.
The Go technology isn't ready for real world use yet but let's say it's at most 36 months away from being ready for prime time. That means that in relatively short order, Amazon can dramatically reduce one of the biggest expenses Whole Foods carries today: labor. They'll still have the cheese guy and the bread lady—those personal interactions are why people shop at a high-end grocer after all. Still, no more jockeying for the shortest checkout lines. It's hugely convenient, and it will happen.
With Go, Amazon can now tackle Whole Foods’ biggest issue for most people: price. As much as I love it, my family doesn’t do our grocery shopping at Whole Foods. I have a great experience, but I need a second job just to pay the bill. In fact, I walk around with my iPhone out looking up pricing and even placing one-click orders on Amazon. Now, if I could get that Whole Foods experience at Amazon prices? Sign me up.
Amazon will continue to do what they do best: leverage technology to remove inefficiencies in established industries, give customers the best possible experience along the way, and provide a shortcut to the things I want to do. This combination is their killer app.
The Drupal Opportunity
The opportunity for Drupal companies could be limited or could be huge. It seems unlikely that Amazon will continue to use Drupal to power their Whole Foods infrastructure in the long run. In the short run, however, Whole Foods will continue to operate as an independent, wholly-owned subsidiary—just with a lot more coverage and support from the most technically-savvy retail company around.
Outside of the immediate timeframe, it could open opportunities to build closer ties to Amazon through the use of headless Drupal for backend data storage, retrieval, and integration. As much as retailers suffer from Amazon’s dominance, manufacturers benefit from frictionless distribution and additional sales channels that will be created. That gives us, the Drupal community, more opportunities to do what we do best with Drupal 8 and beyond. We can continue toward building voice interactions that tie into Amazon’s Alexa infrastructure in unique ways; Tech stacks that better integrate e-commerce platforms into Amazon’s listings and sales engine; and possibly even recruiting opportunities for top Drupal talent that may be winding down their tenure with Whole Foods.
And that’s not even to mention the retailers that want to compete with Amazon head-on. They need what Drupal has: vision, community, and a platform for building world-class, sustainable, and expandable solutions. They need technology that allows them to meet and beat the Amazon at their own game. They need a shortcut to success, and that’s Drupal 8.