Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Whole Foods And Amazon Merger Is A Sign Of The Major Trend Every Investor Should Be Aware Of

Companies / Mergers & Acquisitions Jul 06, 2017 - 04:19 PM GMT

By: John_Mauldin

Companies

BY PATRICK WATSON : If you are a shareholder in either Amazon (AMZN) or Whole Foods Market (WFM), their combination ought to please you. 

Both stocks rose on the merger news while the rest of the grocery industry dropped. But in the long run, I’m not sure their deal will work out well for any of us.


Here’s why.

Whole Foods Won’t Become Logistic Hub

No one outside Amazon (and possibly within it) really knows what Jeff Bezos plans for Whole Foods.

We do know he’s been trying to break into groceries for years. We also know he sometimes acquires companies and then leaves them mostly alone. Amazon bought Zappos in 2009, but today it’s still Zappos.

Much of the Whole Foods analysis revolves around Amazon’s using the stores as a kind of delivery hub or pick-up zone. I don’t think that will happen.

First, the stores don’t have much extra space. They can be grocery stores or warehouses but not both. Second, Whole Foods stores are usually in high-end shopping centers. Amazon could probably find lower-rent space not too far away if it wanted logistics hubs.

So, I think Whole Foods stores will still be grocery stores. But they will change.

High Tech Meets Whole Foods

They’ll get new technology. Amazon Go could be the model: a grocery store with no check-out. You get an app that tracks you through the store, identifies whatever you pick up, and charges you for it.

That would work pretty well at Whole Foods—they’re already halfway there.

Consider the price labels on their shelves. Instead of paper tags, most Whole Food products have these little digital devices. Presumably they’re networked and a central office can change them instantly.

We also know that Amazon—the online part of it—uses dynamic pricing that can change frequently. Whole Foods is already set up to do the same in its physical stores. You can bet Jeff Bezos noticed.

The genius of Amazon Prime is that the free shipping reduces your price sensitivity. They don’t force Prime on you, but they don’t need to. Many folks search for what they want and filter by the items that are Prime eligible, then choose.

They never know whether a less expensive non-Prime option is available.

I suspect Whole Foods under Amazon will become a more sophisticated version of what it is now: a premium-price grocery store catering to well-off people. They’ll either dash in to grab what they want or have it delivered. In either case, this service will further insulate the Protected class from once-common experiences.

Investment Implications

The process has been underway for some time.

About a year ago, my colleague Robert Ross and I started seeing trading opportunities in the low-end retailers and dollar stores. Another one popped up on our screens after the Amazon-Whole Foods announcement sent grocery stocks down.

As John Mauldin keeps saying, we’re overdue for recession. I agree, and I think it makes sense to own stocks that tend to do well in times of economic weakness. The dollar stores are tailor-made for that. But others see the opportunity, too.

Aldi and Lidl are European grocery chains with big plans to expand in the US. I’ve never lived where they had stores, so I have no personal knowledge; but Robert has, and he describes Aldi as “Dollar General with produce and meat.” The atmosphere is spartan, but the prices are apparently low.

See where this is going?

One of the fascinations of economics is the way market forces nudge people and businesses in new directions. Unraveling cause and effect can be tough, but things don’t happen randomly. Every trend is really a long chain of actions and reactions.

The Protected class’s increasing separation from mainstream society is a trend that we increasingly see reflected in retailing. Stores that cater to either the top or bottom extremes—luxury retailers and dollar stores—are doing well. Those that cater to the middle are struggling.

Now, that trend is reaching the grocery segment.

Subscribe to Connecting the Dots—and Get a Glimpse of the Future

We live in an era of rapid change… and only those who see and understand the shifting market, economic, and political trends can make wise investment decisions. Macroeconomic forecaster Patrick Watson spots the trends and spells what they mean every week in the free e-letter, Connecting the Dots. Subscribe now for his seasoned insight into the surprising forces driving global markets.

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in