5 Quick and Crazy Ideas About What Amazon’s Acquisition of Whole Foods Means for the Intersection of B2B and B2C

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We, like a lot of folks, said “whoa” this morning when reading about Amazon’s announcement that it was buying Whole Foods. It stopped us in our tracks, which is not a surprise. For if we were to dissect our personal household spending, Whole Foods would certainly top our lists, like many other families who can afford it, no doubt.

And so would Amazon, for that matter. In fact, Pierre sheepishly received a congratulatory note from Amazon that he saved himself 80 trips to the store. He claims, however, that most of it was his daughter buying ingredients to make and sell “slime” at middle school.

But what’s curious from our vantage point is not what Amazon’s purchase of Whole Foods — if approved by shareholders and if it passes regulatory hurdles — means for our own credit card bills. Rather, we’re keen to see what it means for Amazon Business and the intersection of business and consumer buying.

As a side note, we cover Amazon Business extensively on Spend Matters, and the B2C giant is increasingly proving a disruptor in the e-procurement, distribution and tail spend markets, as well. Curious procurement and B2B minds can start here:

Regardless, let us humbly submit five quick, dare we say “crazy” ideas we’d like to toss out that intersect B2C and B2B lines.

1. The Death of Brands

"The death of brands" is widely becoming a reality, at least in B2C. Amazon is a major contributor to the reduction (some might argue full elimination) of branded products in decision-making. Consider now that there are no major brands at Whole Foods, aside from its own label.

Now imagine this notion of the demise of brands extending to B2B, as well, a trend that one could argue has started already in earnest as data on supplier performance, quality and, of course, more transparent pricing contributes to decision-making in increasing disproportion to “trust” founded on past relationships alone.

Whole Foods provides a fascinating test case for developing trust around a store or brand versus branded products. In many cases, business buyers “shop” for catalog-based SKUs through distributors based on coverage and consistency across brands -- especially for tail spend areas. Amazon’s owning of “trusted” brands such as Whole Foods will no doubt lend credibility to those that shop for B2B needs, too, as brand loyalty changes and “in data we trust” continues to replace “in brand we trust” in B2B buying decisions. Amazon, of course, also already provides analytics on spending, suppliers and other metrics to Amazon Business customers.

2. Localization and Grainger

Whole Foods has roughly 430 retail locations. Grainger, if you count Canada, has roughly 430 locations as well. A coincidence? Almost certainly.

To be sure, Grainger locations could not be more different than Whole Foods — in type, purpose, location, placement (i.e., warehouse versus retail). But there is no substitute for “last mile” fulfillment in B2B distribution. And this requires localization.

Could Whole Foods retail locations (or distribution facilities) have space for just-in-time industrial cleaning supplies (perhaps even “green” ones), light bulbs/electrical (also “green,” perhaps?) and safety supplies for B2B? Who knows? But we can’t help but think about it — and how localization could create further buzz around Amazon’s attempt to take market share away from “generic” industrial distributors.

3. Buying into the Grocery Supply Chain

There’s a broader supply chain story (which can extend to B2B) that shows Amazon does not have pride of fulfillment and distribution ownership beyond a certain point. Yes, its warehouses are incredibly efficient, and it makes use of clever robotics and automation systems that other retailers don't have access to. For example, Amazon, unlike and other future grocery competitors, has the war chest to acquire upstarts in the area like Kiva.

But the fresh foods and perishables supply chain is something entirely different, and one that Amazon struggled with in the “fresh” area. Acquiring Whole Foods is perhaps proof that Amazon is willing to buy its way into managing adjacent supply chains in which it has struggled or not focused on yet. It also could provide a fascinating localized test-bed for Amazon Go bridging the consumer and B2B divide.

4. Conquering the Last Mile

Last mile distribution (generally) in B2B is still king. There are two angles to this.

First, the ability to wean itself off of logistics partners by continuing to acquire strategic puzzle pieces of the fulfillment end of the supply chain signals to us that Amazon is thinking about ways of not only de-risking its business (from a margin perspective) but also considering all steps in getting a physical product to end customers — whether businesses or consumers.

This matters even more in just-in-time (or close to it) B2B environments. Amazon has also been shifting toward using such contract drivers and this type of “Uberization” (or perhaps “Lyftization,” given the latest momentum swings) is obviously core to Amazon, especially with Uber Freight coming. It wouldn’t surprise us if Amazon eventually got into the private hire services area, given that Amazon is ramping up its autonomous vehicles team.

Second, consider that supply chain localization has replaced low-cost country sourcing as the “strategy du jour” in many manufacturing, CPG and other vertical markets — for a variety of reasons (which predated President Trump, although trade is certainly one of the contributors). So, too, does Amazon appear to be following — in fact creating — a localization model, even if it is going to start with B2C. Sure, Walmart can “win” the rural areas. But the battle cry for “inbound” and the move to “city/burbs” market is an undeniable trend globally.

As such, the move enables Amazon in the near term to incorporate a more localized inbound supply chain from growers and local producers, which in turn will let Amazon leverage its efficiency. For example, as a first step, it maybe even able to solve the food desert problem in urban areas with small format stores/lockers tuned to local needs. By mirroring B2B supply chain localization strategies of Global 2000 companies on their inbound supply chains, Amazon is seizing on a trend on which its Whole Foods learnings in B2C could quickly be applied to B2B distribution and sales on the outbound side.

5. Corporate Catering

The corporate catering market is a highly fragmented, $25 billion dollar industry, which is, of course, a subset of the broader catering market. (Floral could be lumped in here, too). While Amazon Business has not yet fully turned its attention to business services generally, Whole Foods provides an intriguing launch engine to leverage a fragmented “tail spend” category for many companies that requires both localized facilities (for preparation) and distribution.

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