Why Amazon Bought Whole Foods: To Beat Walmart

Why did Amazon buy Whole Foods? To beat Walmart in the war for the on-demand grocery shopper.

As announced June 16, Amazon and Whole Foods have agreed that Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion. Whole Foods will operate under its own name. The acquisition will give Amazon ownership of 460 stores in the United States, Canada, and the United Kingdom as well as Whole Food’s built-in ecosystems of customers and suppliers.

Amazon’s expansion into brick-and-mortar grocery industry is well known (as is the company’s general encroachment into offline retail.) To date, Amazon’s strategy has been to build and pilot its own stores. So why would Amazon buy a chain of grocery stores rather than develop its own? I believe Walmart is forcing Amazon to accelerate its expansion.

Chronology of a Retail War

As I have blogged, Amazon and Walmart are in an intense fight to own the future of retail, including the $600 billion grocery industry. Both businesses are racing to win loyalty from the on-demand consumer who expects a frictionless buying experience both online and in the store:

  • Amazon has been piloting its own models for using physical stores to provide on-demand grocery services, examples being the launch of Amazon Go and Amazon Fresh Pickup. Amazon Go is supposed to provide a completely frictionless buying experience via physical self-service grocery stores where anyone with an Amazon account, a supported smartphone, and the Amazon Go app can simply take what they want from the store and leave with no check-out required. With AmazonFresh Pickup, customers can order groceries online and have their orders ready for pick-up at designated AmazonFresh Pickup physical locations — in as little as 15 minutes.
  • Walmart has been making moves of its own, some of which are aimed directly at the grocery-buying experience. In 2015 the company launched Walmart Pay, which shoppers use on their mobile devices to purchase goods in-store. In 2016, Walmart’s began piloting Pickup and Fuel concept stores, where customers order online and then drive to Walmart to have their groceries loaded into their cars by employees. These developments have occurred in context of Walmart developing a stronger way to battle Amazon by developing its own ecommerce business and to gain more efficiency through its offline infrastructure. For instance, in 2016, Walmart purchased hot ecommerce company Jet.com. In 2017, Walmart announced it has been testing a service whereby Walmart employees deliver packages to customers on their way home, which raises the possibility that employees could also deliver groceries.

Both Amazon and Walmart are in a strong position to win the war for the future of Continue reading

Is HomePod Apple’s Death Star in the Music Streaming Wars?

Apple’s newly announced HomePod smart speaker is more than Apple’s answer to Amazon Echo and Google Home in the battle for your home – it’s quite possibly Apple’s major advantage in the music streaming wars.

In unveiling the HomePod June 5 at its Worldwide Developers Conference (WWDC), Apple announced that the voice-activated speaker will be a music-first experience that combines both the quality of high-fidelity Sonos speaker and the intelligent interface of the Amazon Echo – with a focus on providing users access to the Apple Music catalog. As Apple noted in a press release,

Designed to work with an Apple Music subscription for access to over 40 million songs, HomePod provides deep knowledge of personal music preferences and tastes and helps users discover new music.

At WWDC, Apple Chief Executive Tim Cook said the speaker has “amazing sound and incredible intelligence that will reinvent home music.”

Why the focus on a high-fidelity experience with an emphasis on music? One reason is that Apple wants to be the leading music streaming provider – badly. After disrupting the music industry through iTunes and the iPod, Apple found itself looking behind the times when consumer tastes shifted from downloading songs on iTunes to streaming them on apps such as Spotify. And looking outdated is strange ground for Apple. Apple’s desire to play catch up with streaming was a big reason why the company paid $3 billion for Beats in 2014. Months after buying Beats, Apple launched its own service, Apple Music, in 2015.

The good news for Apple is that within two years, Apple Music has become the Number Two streaming service as measured by paid subscribers. And these are heady times for streaming services such as Apple Music and Spotify. In 2016, for the first time ever, streaming music platforms generated the majority of the U.S. music industry’s revenues. As the RIAA noted, the biggest contributor to growth was a doubling of revenues from paid streaming services. But for Apple, there is also some bad news:

  • Amazon has been rapidly encroaching upon music streaming. It offers a limited service to Amazon Prime customers (Amazon Prime Music) and recently launched a subscription service, Amazon Music Unlimited.

Spotify and Amazon are significant competitors with their own strengths and weaknesses:

  • Spotify enjoys the strong brand affiliation with music, its customer base, and outstanding personalized playlists, but the company is losing money.

  • Amazon enjoys an advantage with its deep pockets and the popularity of Echo speaker, which provide a natural platform for streaming music. But Amazon Music Unlimited is an upstart (and Amazon Prime Music is a feature of Amazon Prime, not a pure streaming service, per se).

The Echo factor is big. Echo has experienced astounding growth to dominate the market for voice-activated home speakers, as people become more comfortable with the voice interface. It’s like a Swiss Army knife for doing everything from controlling the temperature in your home to ordering products.

And in addition, Echo is also a platform for playing music through voice commands (“Play the new Lorde song”), something Spotify does not offer. In 2017, according to eMarketer, 35.6 million Americans will use a voice-activated assistant device at least once a month, and 71 percent of them will use Echo. (Google Home has the second highest marketshare behind Echo, at 24 percent, but Google does not release user figures for its Google Play streaming service.)

No wonder Amazon offers Amazon Music Unlimited at its lowest price to owners of Amazon Echo speakers: Echo is a Trojan Horse for Amazon’s music streaming product.

But Swiss Army knives, while being useful, are not great at everything. The Echo is not engineered specifically to listen to music. HomePod is. At WWDC, Apple Senior Vice President of Global Marketing Phil Schiller said that HomePod will provide the high quality of a Sonos speakers and the smart interface of the Echo.

“These aren’t smart speakers, Schiller said of Sonos. “They don’t sound so great when you listen to music,” he said of the Echo. But HomePod will sound great and act as a home musicologist, he said.

He indicated that the HomePod will make it possible for consumers to call up music using complex voice searches and then listen to music through a product that provides state-of-the-art sound including spatial awareness, which adjusts the audio depending on where you are sitting in the room.

But the ace in the hole is the integration with Apple Music. As Apple announced,

By saying, “Hey Siri, I like this song,” HomePod and Apple Music become the perfect musicologist, learning preferences from hundreds of genres and moods, across tens of thousands of playlists, and these music tastes are shared across devices. Siri can also handle advanced searches within the music library, so users can ask questions like “Hey Siri, who’s the drummer in this?” or create a shared Up Next queue with everyone in the home. HomePod, Apple Music and Siri deliver the best music experience in the home that streams ad-free directly to HomePod.

HomePod will also provide the same functionality as Echo, providing functions ranging from turning on the lights in your home to providing sports and weather information.

The HomePod should be available in December at a cost of $349, a cost that is significantly higher than Amazon Echo and Google’s own Home speaker. By pricing the HomePod at the high end, Amazon is banking on consumers:

  • Accepting Apple’s position as a premium brand.
  • Caring enough to pay more for better sound.
  • Subscribing to Apple Music because it’s so easy to listen to music with voice commands on HomePod. (I wouldn’t be surprised if Apple offers an incentive for bundling Apple Music paid subscriptions and HomePod.)

It’s an interesting bet. Consumers have been indifferent to sound quality on mobile devices, not caring enough about sound quality to buy high-end mobile streaming products such as Pono. Meanwhile in the home environment, the growth and popularity of Sonos speakers for years showed that people would pay for premium sound  – but then Amazon’s encroachment on Sonos suggest that consumers were willing to sacrifice the fidelity of Sonos for the convenience of Echo. And now Apple believes consumers will do the same with HomePod.

Apple won’t put a dent in Echo’s 71-percent market share anytime soon, but Apple doesn’t need to. Apple is not offering a utility that competes on price as Echo does. Apple is selling a high-end experience first and utility second. Apple Music is central to that experience. Will HomePod be a catalyst for Apple Music to eat into Spotify’s lead?

Where Is Your Creative Hustle?

When an idea comes to you in the middle of the night, do you act on it, or do you yawn, roll over, and return to the arms of Morpheus, even though the original spark of inspiration may dissolve into the recesses of your unconscious mind? When you sit down to create – whether you write blog posts or poems – do you give yourself over to the power of the muse, or do you squeeze in creativity amid a flurry of tweets, Facebook posts, and YouTube clips?

If you possess creative hustle, you don’t wait around for the right time to create. You choose to dig into the well of ideas even when doing so means staying up late — even when you’d prefer the comfort of your pillow. You record every idea no matter how silly or rough because any idea can become something great. You choose to push yourself. And you reap the rewards of taking an idea to full fruition because you cared too much to let it remain a rough draft in your head.

Gregg Allman, who passed away May 27, was a creative hustler. Throughout his life, ] with the Allman Brothers and as a solo performer, he wrote or co-wrote some of the landmark songs in the history of rock, such as “Whipping Post,” “Melissa,” and “Midnight Rider.” He wrote and sang of hard living, relationships gone sour, and lawless living in the tradition of the great blues musicians of the Mississippi Delta, but with his own personal style suffused with grit and grace. And his thirst to create was insatiable. In the autobiography My Cross to Bear, he tells the story about how he answered the call of creativity to write one of the Allman Brothers’ signature songs, “Whipping Post,” in the middle of the night while he was staying as a guest in someone’s house. It’s a lengthy passage but worth sharing in its entirety because it says everything about the essence of creative hustling:

So that first night, I laid me down to go to sleep on my attic couch, and I dozed off for a while. All of a sudden, I woke up, because a song had me by the ass. The intro had three sets of three, and two little steps that allowed you to jump back up on the next triad. I thought it was different, and I love different things. It hit me like a ton of bricks. I wish the rest of them had come like this – it was all right there in my head, all I had to do was write it down so I wouldn’t forget it by the morning.

I started feeling around for a light switch, but I couldn’t find one anywhere. I was in my sock feet; I just had on my drawers and a T-shirt. I found my way into the kitchen and it was pitch-dark. I had my hands out and I touched an ironing board – thank goodness, instead of tripping over it, which would have made a terrible noise.

I was feeling all around the counters for a piece of paper. I couldn’t find any paper or a pencil anywhere, but I did find a box of kitchen matches. A car happened to go by, and its lights flashed long enough to allow me to see that red, white, and blue box. I knew I could use the matches to write with, because I had diddled around enough with art to know what charcoal would work.

I figured the ironing board cover would work as a pad, so I’d strike a match, blow it out, use the charcoal tip to write with, and then strike another one. I charted out the three triads and the two little steps, and then I went to work on the lyrics:

“I’ve been run down, and I’ve been lied to . . .”

I got it all down on that ironing board cover, in the closest thing to shorthand as I could muster up.

That passage has always convicted me as surely as a Biblical verse. I think of all the times I’ve frittered away ideas because it was just too inconvenient to stop what I was doing and run with them. Too often I manage the creative process like a to-do list, like something I just handle when I can, not when I need to. I marvel at how Gregg Allman describes a song taking hold of him, like a tick that gets into your skin and won’t let go. And he won’t allow the lack of available tools to stop him. He is willing to blow out match after match until he has enough charcoal to capture the moment.

But what if he’d rolled decided to get a good night’s sleep when the urge to create had taken hold? He might have gotten out of bed the next day barely remembering that moment of inspiration. He might have lost “Whipping Post” to the demands of the day. And the song might have become nothing more than a vague memory in Gregg Allman’s head.

Gregg Allman was a servant to creativity. He took the creative gifts bestowed upon him and hustled. Do you?

Image source: George Rose, Los Angeles Times