There’s yet to be any real evidence that Uber’s business model will ever do anything other than burn investors’ money to make traffic worse.
“The subscription e-commerce market has grown by more than 100 percent a year over the past five years. The largest such retailers generated more than $2.6 billion in sales in 2016, up from a mere $57.0 million in 2011.1 Fueled by venture-capital investments, start-ups have launched these businesses in a wide range of categories, including beer and wine, child and baby items, contact lenses, cosmetics, feminine products, meal kits, pet food, razors, underwear, women’s and men’s apparel, video games, and vitamins.”
Original source: Subscription businesses, McKinsey
“Curation services, with 55% of total subscriptions, are by far the most popular, suggesting a strong desire for personalized services. Replenishment accounts for 32% of subscriptions and access subscriptions for 13%.”
Original source: Zuora IPO and how subscriptions changed how we do business
‘This is not “sharing” economy; these are fully professionalised marketplaces.’
Original source: New Economy, Meet Old Continent
I was on vacation last week, so this notebook is a little stale. Perishable news. (JOKES!)
- The deal size is $13.7bn, a 30% premium; expected to close in the second half of this year (Todd Bishop)
- Highly likely to remain independent: “Reading between the lines of Bezos’ statement, Amazon is signaling that it doesn’t plan to disrupt what Whole Foods is doing with a major shakeup of the retailer’s infrastructure or strategy in the near term. Amazon has a history of allowing acquired companies — from Audible to Twitch to Zappos — to continue operating with relative independence, with some product and feature integrations.” (Ibid.)
Not good for competition
- Investors really believe in that AMZN magic: “In total, those five grocery chains [Target, CostCo, Kroger, Walmart, SuperValu] shed about $26.7 billion in market capitalization between the market’s close Thursday and Friday morning, as investors worried that Amazon deeper push into the industry could be a death knell for some.”
- EU too: “The worries weren’t just contained to U.S. markets. Some investors in the U.K. and Europe also saw the purchase as a sign that Amazon could take its grocery ambitions global. Shares of French retailer Carrefour fell sharply on the news, about 4%, while in London, Tesco shed 6% and Sainsbury dropped 5%.”
- See chart too.
- More brick-and-mortar, foot-traffic, and distribution centers for Amazon: “the acquisition provides the AmazonFresh program, currently only in 15 markets, with 465 new locations [the Whole Foods stores] that generate eight million customer visits per week as well as 11 warehouses.”
- Amazon now has a big foot-print across the US, at least in affluent neighborhoods.
- Like Amazon, Whole Foods is big into private label: “Whole Foods generates $2.3 billion worth of private label and exclusive brand sales per year; its private label products account for 32% of items in Instacart’s food category, taking up far more of the shelf than Walmart Grocery (16%) and Peapod (6%).”
- (Further) driving down supplier costs: “It’s also possible that Amazon will use Whole Food’s partnerships with suppliers to get more of them on the Amazon platform. Amazon and Whole Foods will be tough negotiators, but the lure of the 300 million customer accounts on Amazon.com, in addition to all of its other CPG-related programs, will be tough to turn down.”
- More: “he scale at which Amazon is making use of this strategy should force CPG brands and Big Box retailers to make some major changes to their distribution strategies.”
- Ben Thompson, with some multi-sided platform theory sprinkled in:
- “The truth, though, is that Amazon is buying a customer — the first-and-best customer that will instantly bring its grocery efforts to scale.”
- “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”c
- “At its core Amazon is a services provider enabled — and protected — by scale.”
- This should remind you of the “middle-man”/unpaid for buy in my warehouse/drop-ship type of advanced retail play that the likes of Dell made famous.
- I want pizza and baby-wipes, not software – this kind of argument (though, not really “invalid”) makes me bristle. It’s like a pizza company saying they’re a technology company. As long as the pizza comes in the box and the paper-towels come in the mail, they can call themselves whatever they want…but the pizza shop and Amazon are, to me, a pizza and retail company. How they get the pizza into my mouth is not my problem. Since I’m a paying customer in these instances, it’s not like the “you are the product” epiphany of .com, eye-ball companies.
- Whole Foods had invested in Instacart in May 2016. What up with that, now?
- Laura Entis: “Just last year, Instacart and Whole Foods signed a five-year delivery partnership, which gave Instacart exclusive rights to deliver Whole Foods’ perishable items.”
- I guess it’d make sense for someone like Walmart to acquire them. Can Instacart be stand-alone now?
Getting that cash
- For TAM:
- FMI put estimate the US TAM at $668.680bn in 2016.
- Statista, on the US market: $606.26 in 2015.
- Very old, but the USDA in 2011 said, “The [US’s] 212,000 traditional foodstores sold $571 billion of retail food and nonfood products in 2011.”
- Online grocery TAM: “Last year, online grocery sales were about $20.5 billion.” The growth rates, of course, are huge compared to in-store.
- More market slicing numbers.
- Room to grow, future cash to grab:
- “Grocery remains the most under-penetrated e-commerce category, with less than 5% of sales happening online. However, with 20% of grocery sales estimated to begin online by 2025, brands investing in digital will reap the rewards.” (Elisabeth Rosen)
- Online groceries penetration: “The online grocery business is still in its infancy. Last month, for example, 7% of U.S. consumers ordered groceries online, according to Portalatin. Of this group, 52% already has an Amazon Prime account. Groceries represent “the final frontier for Amazon — they haven’t quite cracked the code on that, but they already have a relationship with consumers.”
- Some interesting grocery spending trends, by demographic, from Nielsen in 2015, via Cooper Smith:
- Mint says that last year, my family of two adults and two kids spent ~$15,000 at the grocery store. So that’s around what you’re upper-middle-class people (or whatever I am somewhere in the 90th percentile) spend, I guess.
For us consumers…
- Many predict either free or highly discounted delivery fees for Amazon Prime members. That certainly makes sense as Amazon Video and Music, and Prime Now, shows.
- This Cooper Smith guy is a good Amazon analyst.
- While bunch of survey and demographics data, globally, in this April 2015 Nielsen report.
- Bold predictions and cow animated gifs on Amazon in as a whole, after this, from Scott Galloway. (Yeah, that dude who does the machine-gun, yelling Mary Meeker style slides on e-commerce and such.)
- As always, what’s not to like about the booze-y tone of some Matt Levine commentary?