Amazon buys WholeFoods and what this means for you...

Amazon just announced that it plans to buy Whole Foods for ~$14 Billion.

Back in late 2016, Amazon started testing out "Amazon Go", a small 1800 sqft grocery store, open only to their employees in Seattle. The majority of the work at this grocery store was performed by robots. In Feb 2017, Amazon was thinking about creating a larger version (10k to 40k square feet) that would require only 10 humans and lots of robots. There was a lot of speculation if Amazon could pull that off. It would be a huge task to acquire real estate and setup grocery stores across the US and other countries. Now that Amazon has solved that problem by buying Whole Foods, I assume they will introduce robots into the Whole Foods ecosystem.

What are the implications?

Investigative Googling revealed there are 430 Whole Foods stores with an average store size of 39k square feet and an average of 300 employees per store. If Amazon is able to pull off what they were trying to with Amazon Go, a conservative estimate of human workers needed at Whole Foods is 20 to 30 (that accounts for different shifts). That's a reduction of 90% of the work force at Whole Foods or 116,000 jobs lost! This may take a few years, but that's a lot of jobs.

Amazon bought a robotics company called Kiva Systems in March 2012 based in Massachusetts. Ramping up robot production would potentially lead to new jobs being created at Kiva. I imagine robot production is a higher skilled job than a cashier, bagger, or stocker and it wouldn't take very many employees to replace the $116k low wage jobs lost at Whole Foods. Maybe Kiva will create robots to make other robots!

Other impacts

Amazon is great at efficiency, so prices would decrease at Whole Foods. That would cause pressure on other grocery store chains. The grocery store business has very thin margins, estimates range from 1% to 3% margin. Competition from Amazon could easily eliminate many grocery store chains, leading to additional job loss.

This past week the Federal Reserve commented on how phone bills for the average US person had decreased due to competition. They used that as part of their reason for suggesting that the economy has low inflation. Food costs are a much bigger portion of an average person's expenses. This will lead to the Fed thinking we have even lower inflation, which could lead to higher interest rates.

Less jobs, higher interest rates...feels this could lead to a recession.

You can read more about Amazon's announcement of Whole Foods purchase here.

What do you think about Amazon's purchase of Whole Foods?

Do you think this will lead to over 100k jobs being lost?

Will it lead to higher interest rates?

Will it lead us into next recession?