Over the coming days Supply Chain Matters will feature both our own and invited guest commentaries regarding last week’s blockbuster announcement that Amazon intends to acquire the Whole Foods grocery chain for $13.7 billion.
In this posting, we update our readers on rather interesting added developments, to state the obvious.
A report published by The Wall Street Journal, Get Off Amazon’s Cloud, (Paid subscription required) once again reinforces the extent of the cutthroat competition that Wal-Mart and other retailers now have with Amazon. The report indicates that Wal-Mart is instructing software and other technology suppliers to the global chain to refrain from utilizing Amazon Web Services (AWS) as the backbone Cloud platform. The report notes:
“Wal-Mart , loath to give any business to Amazon, said it keeps most of its data on its own servers and uses services from emerging AWS competitors, such as Microsoft Corp’s Azure.”
That is certainly an unexpected boost for Microsoft as well as AWS competitors such as Oracle, Blue Cloud, IBM and others. Other technology providers catering to retailer software technology needs further confirmed specific retailer requests to prefer Cloud platforms other than Amazon’s. We have similarly heard of such concerns shared by certain vendors in their retail customer interactions.
The concern is access to sensitive customer or other fulfillment or supply chain related data. That makes sense. However, AWS, along with other Cloud platform vendors must adhere to certain regional and global data security standards associated with certification standards. But that is not going to appease retailers who after last week’s announcement, are not going to trust anything related to Amazon supported services.
The obvious benefactors are software and Cloud applications providers catering to retail industry needs who elected to outsource Cloud infrastructure to providers other than AWS. That would include B2B Business Network and EDI messaging support providers as well as transportation and logistics Cloud-based providers. After today’s WSJ report, product marketing teams of Cloud infrastructure platform provider will likely re-double their efforts for targeting retail industry, including all its supporting elements.
Another Whole Foods Suitor?
While on the subject of Wal-Mart, JP Morgan indicated in an investment advisory that this retailer is likely the only other retail chain that can make a counter-bid to acquire Whole Foods, but there are likely other overriding factors such as clashing corporate cultures, Whole Foods customer whiplash and a potential bidding war with Amazon that would likely make such a move unlikely.
A posting published by Business Insider provides added details of the JP Morgan analysis. The sum total of the JP Morgan argument is why play defense when it’s better to stick to offense:
“Given Walmart’s 20%+ share in grocery, why should the company spend $14B+ on what it’s already good at (selling food via brick-and-mortar) when the money instead could be used to expand and improve Jet.com and Walmart.com? Jet.com is Walmart’s urban/millennial alternative to Amazon Prime, and Walmart.com is in many ways the ‘forgotten man’s’ alternative to Prime.”
From our lens, that is a powerful argument and a likely indication that there will not be a counter bid.
Many of the post-announcement opinion commentaries speculate what Amazon will do to leverage a well-respected grocery retail chain. From our lens, we advise readers to consider all the supply chain, customer fulfillment and customer intelligence capabilities of Amazon applied to a leveraged online and physical retail grocery presence. Picture a Whole Foods store augmented with an added, automated customer fulfillment storeroom complete with Kiva robots sorting and staging online orders for parking lot pick-up. Think of the possibilities of the virtual Amazon fulfillment button affixed in our kitchens that electronically transmits the grocery shopping list to an online order available for one-hour pickup.
The possibilities are endless and the threat is real.
Stay tuned for continuing commentary.
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