Food distribution saw a major reorganization in the 2oth century with the rise of large, multi-product venues. Shoppers could not go just to one food outlet for just about everything they wanted at low prices.
But the new system is not perfect. The large sellers tended to treat food as a commodity which lowered the possibility of raising quality. And as the local first idea tood root, food chains that are obviously not local look a bit old fashioned. Moreover, because these brands are competing mainly on price, they do not hve a lot of flexibility in adapting to changing tastes.
Meanwhile, in Estonia, we have seen the opposite. The rises of chains like Selver, Consum, Rimi, Prisma and others has radically upgraded access to higher quality products from the 1990’s to today. And other European food chains are more quality oriented.
But back to the US —The problem with quality created an oppotunity for new brands to disrupt the market. Perhaps the most obvious one is Whole Foods. It was originally a niche offering, catering to well to do neighborhoods. But Whole Foods has grown, and you see Whole Foods stores just about everywhere.
But Whole Foods is expensive. Comapnies like Amazon look at the turmoil around making grocery both affordable and high quality and see an enormous oppotunity. After all, it is a huge market. But so far, they have not figured grocery out.
As Steve Galloway points out, there is no huge surprise therefore that Amazon would buy a brand like Whole Foods — even if the price tag is very, very high — in order to jump start its exploration of the grocery market. The question is how Amazon will try to merge its ecommerce approach to distribution that lowers costs in radical ways, to Whole Foods location based approach, which raises quality.
Not everyone is thrilled by this. Amazon has enormous market power and that can trnslate into forcing suppliers to accept lower prices. That may not be good for local growers. And Amazon leverages its prime service to get customer loyalty. Extending a loyalty service like prime into grocery might give Amazon unfair advantrages over its competitors.
On the other hand, there is a trend to “personalizing” grocery shopping. In other words, I may want to partner with my grocery store to track what I like to buy (and why) with prices, comparisons and new ideas that link to recipes and diet advice. That would empower me to be a better shopper, chef and diet manager. It might also give me core information about my personal health needs. From this perspective, a location and ecommerce alliance makes perfect sense. And yes, I would consider signing up for prime if that was part of the deal.