When Amazon.com bought Whole Foods, an upscale grocery chain specializing in organic products, for $13.7 billion it rocked the retail food industry. But why would the biggest online retail outlet spend that kind of money for a chain of Brick And Mortar supermarkets? According to Geekwire, two very excellent reasons exist.
Amazon wants to expand into brick and mortar as part of its business model
Amazon is interested in developing brick and mortar stores to widen the business into more traditional retailing, marrying it to its sophisticated distribution system that delivers products directly to customers.
Amazon has already opened a chain of bookstores with locations in Seattle, San Diego, Portland, Dedham, Chicago, Lynnfield, New York City, and Paramus with more locations to follow. The bookstores also sell Amazon electronic products such as the Kindle.
The company has been interested in expanding into retail groceries for some time. The purchase of Whole Foods gives Amazon over 400 brick and mortar supermarkets that have been well established with a loyal customer base.
Whole Foods as a laboratory to use artificial intelligence for distribution
Amazon is famous for its distribution system, moving a variety of products from a network of warehouses and fulfillment centers directly to customers.
However, the science of shipping food, often perishable fruits and vegetables, is a difficult one. Whole Foods gives Amazon the means to not only collect data in real time on customer shopping patterns but to adopt that data into distribution systems.
The company intends to apply the latest in artificial intelligence technology to refine and simplify the movement of food from the farm, through processing plants, and finally to retail outlets.
The technology is likely to shake up every other supermarket chain such as Safeway and Krogers. Whole Foods’ competitors will have to adopt their own AI run systems or find themselves priced out of the market.
Automated stores
Another technology that Amazon is working on will automate the way shoppers purchase products in physical retail outlets.
Instead of putting everything into a shopping cart and then waiting in line to be checked out, the store of the future will automatically add items to a shopping list the moment a shopper picks them up and puts them in a cart. Then, when the shopper leaves the store with his or her items, the software will automatically deduct the price of the items through a smartphone app.
The technology will simplify the act of shopping. On the negative side, it will destroy the jobs of quite a few checkout clerks and baggers in retail stores that adopt the new system.
