In June 2017, Amazon, the world’s third largest e-commerce company, announced its acquisition over Whole Foods Market for US$ 13.7 billion. Amazon’s move seems to follow the footsteps of Alibaba, the world’s largest e-commerce company that invested US$ 1.25 billion in buying the Chinese online food delivery service Ele.me in late 2015.
The growing encroachment of e-commerce and food distribution is happening everywhere as startup companies have competed to get their way in this sector over the past few years. What’s behind these investments? Why do e-commerces invest so much money in food distribution? Far from being mere corporate acquisitions, these investments mark the beginning of the end of retail as we’ve known it.
Compared to other e-commerce purchases, groceries are habitual and frequent. People shop groceries every week. On average, people in the United States roam for 53 hours a year in supermarket aisles. More importantly, as illustrated in several analyses, e-commerces mean greater access to consumers’ data and purchasing habits. Data help them to develop vertical integration for their own private brand products which, in the long run, will affect how and where these companies source their produce in order to get the lowest price.
Furthermore, e-commerce companies like Amazon and Alibaba see automation as a key strategic advantage in their overall grocery strategy, entailing the risk of a major loss of jobs. Alibaba has begun testing drone-based deliveries to hundreds of customers in three of China’s major cities – Beijing, Shanghai and Guangzhou. Meanwhile, after its acquisition of Whole Food Markets, Amazon plans to add robot workers in Whole Foods Market warehouses to reduce costs. Amazon already uses robots in other business sectors. A new report highlights how increasing automation risks leaving large numbers out of employment, especially in developing countries.
In mid-July 2017, one month after acquiring Whole Foods Market, the Indian government approved Amazon’s proposal for a US$ 500 million investment in retailing of food products in India. This approval enables Amazon to open a fully-owned subsidiary in India to carry out the business of stocking food products and selling them online. For a country like India where 90% of the economy still relies on agriculture and small informal food distribution, online food distribution adds another layer of problems for millions of people. This also opens a new debate amongst consumers in respect to the growing middle-income consumers in Asia’s major cities who seek convenience, while rural low-income producers seek to protect their livelihood.
— source grain.org | 30 Aug 2017