Amazon.com Inc.'s (AMZN) retail strategy has been under a microscope since its surprise $13.7 billion acquisition of Whole Foods Inc. (WFM) in mid-June as investors wonder what Amazon plans to do with Whole Foods and what other bricks-and-mortar retailers it might scoop up next.
"Amazon is an e-commerce retailer who has evolved in understanding and accepting the strategic value of physical retail stores," said Brittain Ladd, who left Amazon in May for family reasons after working there for two years, first as the senior manager of strategy and expansion for AmazonFresh and then as the senior manager of Amazon Global Logistics for the Special Projects unit.
If anyone besides Amazon CEO Jeff Bezos can accurately predict what's next for the e-commerce dominator, it might be Ladd. He recommended that Amazon should buy Whole Foods in a paper he posted to LinkedIn back in 2013 when he was working for Deloitte. He was recruited to Amazon in 2015 and since then, the company's grocery expansion plans have followed a similar path to the one Ladd laid out in that 2013 note that was republished on LinkedIn in May 2016. He's now working as a consultant in Salt Lake City.
Ladd believes that Amazon is too surgical and strategic with its M&A activity to simply absorb a struggling retailer like Macy's Inc. (M) , as some analysts have suggested. Just because a winning company like Amazon buys a struggling company like Macy's doesn't mean that Amazon can save it, he pointed out. Ladd believes that Amazon will use Whole Foods' locations, as well as expand into other retail formats, including furniture, appliances, apparel, and shoes by purchasing specific well-thought out retail spaces, rather than a specific retail chain. "Amazon doesn't want too big of a physical presence because then it's not surgical," he said. "It wants to control its brand."
Instead of buying Macy's, Amazon can reduce the risk and cost of its retail strategy by simply changing the formats of the 466 Whole Foods stores across the U.S. and the United Kingdom, Ladd said. Amazon will also increase its store count for groceries in the future as it scales the grocery ecosystem nationwide and globally, but it doesn't have to match Walmart or Kroger in store count, he noted.
Amazon will most likely copy Apple Inc. (AAPL) by sectioning off a section in Whole Foods for a "mini Apple store" where customers can try out its own Amazon devices, like the Amazon Echo or the Amazon Fire Tablet, and become more comfortable with them. "That's what Apple's stores have always done right is letting people test out its devices and gain confidence in them," he explained.
In the same way, providing customers with quality food and grocery services at Whole Foods gives Amazon the opportunity to create further trust and brand loyalty, he said. Once people trust a company with their food, then they will also trust its e-commerce platform, as well as its music and video services. The company will get stickier and stickier, drawing in more and more Amazon Prime members, who spend more money on the platform than non-Prime members. The program already has an estimated 85 million members, according to a recent study from Consumer Intelligence Research Partners.
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