Friday, June 16, 2017

Amazon/Whole Foods Derangement Syndrome

Today, Amazon announced that it would purchase Whole Foods (a/k/a "Whole Wallet").

Stock values of Kroger, WallyWorld, and some other grocer dropped in response.


Kroger and Wally sell to entirely different consumers than does Whole Foods.  They simply do not compete except, perhaps, at the very bleeding edge of the margins.  Thus, the purchase should not have an impact on Kroger/Wally traffic at all.

Perhaps the NoooooYaawk stock researchers are just a little too much caught up in NooooYaaawk.  That wouldn't surprise anyone who has paid attention to politics.

Speaking of derangement, some analysts are questioning the GM purchase of a $500 million stake in Lyft.  GM says that they are a Transportation Company or something like that, which justifies the move.  More well-grounded people think that GM makes cars and trucks, not "transportation."

They might want that $500 million back if sales keep going south.  But that's ........oh, well.


Anonymous said...

GM = Goverment Motors = Zomby Motors = More Bailouts = Crony Capitalism.........
GM is just Looking to Give the over taxed taxpayer another BOHICA moment is all

Long ago GM ceased to be an option as a viable source to buy a car
as they seek so many government handouts....

We will see what comes of the Lyft deal gone bad.

Stay tuned in.

steveegg said...

My best guess regarding Amazon/Whole Foods is the analysts think Amazon will make Whole Foods accessible to the masses' wallets that currently shop at WalMart/Kroger/et al. Moreover, the lines are blurring between "low-end" and "high-end" grocers - WalMart now has curbside pickup of groceries, Meijer now has delivery, and Kroger is accelerating the gentrification of Pick 'n Save.

As for GM/Lyft, I seem to recall a phrase called "vertical integration". UAW Motors is looking for a guaranteed buyer of their crap, and Lyft fills the bill.

Dad29 said...

The business model of Whole Wallet is heavy on personal service where the biz model of WallyWorld is commodity price. That's why WallyWorld and Pick have not crushed Sendik. Amazon cannot possibly squeeze enough out of back-end efficiency to overcome the 'personal service' and high-cost foodstocks.

(Of course, Amazon could simply run at a loss, as they have done historically on anything else they do.)

As to the GM thing: "vertical integration" will work best with self-driving cars, because there is no differentiation in those except for size--and any automaker can manufacture "large/medium/small" passenger space. It MAY work with Lyft/Uber, except the drivers cannot afford the cars at present rates of income (about $400/month average at Uber, BEFORE expenses.) Maybe GM sees a way to rent them, but that will require humungous inventory and there's no return on un-utilized assets.

We'll see.

steveegg said...

The driverless model is what Lyft/Uber is working toward, which is why GM partnered with Lyft. Indeed, as part of their $500 million cash injection (from January 2016), GM is providing rentals to Lyft drivers.

Dad29 said...

Umnnhhh...OK, that's what they want to do. Figure 5 years before 'driverless' will be operative--except there will still be a driver: the Lyft critter. Who will be making LESS than $400/month pre-expenses.

It is impossible to see how that will actually work for the drivers, thus for GM.