Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Coronavirus Pandemic Vaccines Indicator Current State - 3rd Mar 21
AI Tech Stocks Investing 2021 Buy Ratings, Levels and Valuations Explained - 3rd Mar 21
Stock Market Bull Trend in Jeopardy - 3rd Mar 21
New Global Reserve Currency? - 3rd Mar 21
Gold To Monetary Base Ratio Says No Hyperinflation - 3rd Mar 21
US Fed Grilled about Its Unsound Currency, Digital Currency Schemes - 3rd Mar 21
The Case Against Inflation - 3rd Mar 21
How to Start Crypto Mining Bitcoins, Ethereum with Your Desktop PC, Laptop with NiceHash - 3rd Mar 21
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

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

© 2005-2019 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

6 Critical Money Making Rules