Amazon said it would pay $ 42 per share, or $ 13.7 billion, to purchase Austin-based high-end grocery chain Whole Foods. This is the kind of deal where you see it, experience a moment of surprise and then move straight to nodding your head thinking, of course.
Amazon is no stranger to food, nor is it a stranger to brick-and-mortar retail. It has dipped its toe in the brick and mortar world with bookstores in Seattle and New York. It has played around with fresh food and groceries with a host of buying options on its site and through services like Amazon Fresh. In the last year, it has tried out a grocery store stocked with cameras and AI instead of employees. It has also experimented with letting people order food online and pick it up at participating grocers.
Meanwhile, it made the Dash wand that lets people scan their food and verbally re-order products virtually free to Prime members the same week it announced a deal to buy a grocery chain with 465 stores nationwide.
Yes, Amazon wants in on food and the kitchen. This has been evident for a while.
But the real question is why. I’ve been working on stories about food and the web for more than five years. There are huge opportunities that technology can offer that go well beyond selling people a basic necessity. Two that come readily to mind are improving the food supply chain and improving people’s health by directing them to well-prepared healthier foods. Both of these fall in line with Whole Foods’ mission.
People have to eat. And when considering food, there are five different areas where tech firms have opportunities. The first step is inventory, which includes knowing what people have and fulfillment when it’s gone. The second is recipe generation, which means taking what people have on hand and helping them figure out what to do with it. Third is preparation, an area where the big appliance companies and a few startups like Anova (which was acquired by Electrolux), Drop and June are offering products.
The fourth area is consumption, where we don’t actually need a lot of tech intervention, although startups like Blue Apron and Juicero are thinking about ways to influence what we consume, and thus change what we eat and how it’s supplied. Finally, for some people there is tracking, the act of logging what we eat for fitness and health purposes. MyFitnessPal (UnderArmor) and Fitbit are some of the startups trying to take data from this segment and use it to influence recipe generation and what is stocked in the kitchen.
With tools like Amazon Alexa tied to kitchen appliances or Amazon Dash Replenishment services, Amazon is going to have a good idea of what people are eating, preparing and buying. Because the goal for Amazon is to ensure that commerce remains as frictionless as possible, control of food fulfillment means Amazon gets a direct play in inventory and recipe generation. At the moment it has less of a role in food prep, consumption and tracking, although it has links to these thanks to Skills on the Amazon Echo.
So in the not-too-distant future, it’s possible that if you buy a pre-prepared meal from Whole Foods, you might be able to scan a barcode on top and have Alexa tell your GE oven how to optimally heat it. That same data might also go straight to your food tracking app of choice. Or, a camera that Amazon has trained to understand what a zucchini looks like so you can automatically check out at the grocery store might also find it’s way into an Echo Look kept in the kitchen. Then when you pull out that zucchini you might get recipe options. (Plus Amazon can send any necessary options to you using Prime Now, its same-day delivery service.)
For Amazon, this acquisition offers it a foothold in fresh food. It also offers Amazon insights into what people buy. While Google is focused on getting search data and cataloging the world’s information, Amazon is focused on getting people to make a purchase. If you’re in the market to sell people stuff, data on their actual buying trends is going to be far better for making recommendations than knowing what they are talking about and searching.