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THE EVERYTHING STORE EXPANDS

News that Amazon intends to buy Whole Foods Market for more than $13 billion was greeted jubilantly by financial markets, with Amazon’s stock rising 2.5 percent, almost enough to cover the entire purchase. At the same time, the shares of other grocery retailers, ranging from Kroger’s to Walmart, were punished severely, plunging as much as nine percent. That mixed reaction—riches for Amazon and excitement from consumers, amidst the decimation of an entire sector of the economy—proves the company’s power. The move takes it one step closer towards founder Jeff Bezos’ long-held ambition of becoming the “world’s store,” and it is unquestionably the central actor in the remaking of American, and perhaps global, consumerism. What remains unclear is whether it is overall a force for good, or a destroyer of traditional retail that erodes jobs, ruins malls, and transforms a once-productive workforce into underemployed, couch-bound consumers.

It took Amazon two decades to amass this kind of authority. Almost exactly seventeen years ago, on Friday, June 23, 2000, Amazon (then Amazon.com) saw its stock crater by twenty percent after the then-powerful investment bank Lehman Brothers issued a warning that the company was on the verge of insolvency, so quickly was it spending down its cash reserves. Amazon had already shed more than sixty percent of its value over the previous six months, and Bezos alone had lost billions in paper wealth. Yet he remained confident that his company, less than ten years old, would one day be selling everything to everybody.

Back then Amazon was worth about $15 billion, a valuation that would fall to less than $5 billion in 2002; today, it is worth nearly $500 billion. Market cap alone is no guarantee of future strength (just look at IBM in 2012), but in the case of Amazon, it does represent at least a radical shift in how financial markets value the company, even as it continues to plow a massive percentage of its revenues into new and different markets: drones, data centers and, as of today, supermarkets.

Though not technically a company from Silicon Valley, Amazon has always felt like part of it. Bezos talks the same patois of the virtue and necessity of failure; he likes the cliché of “swinging for the fences”; and he believes that building a dominant disruptive behemoth is good, ultimately, for customers and the world, making it possible for more people to get what they need, when they need it, at a cost that only declines.

But Amazon also behaves like a traditional retailer in many ways, which makes it not quite like the bits-and-bytes-addled dreamers of the Valley. It has undercut its brick-and-mortar competitors by consistently underpricing and even selling at a loss for years until its competitors—saddled as they are by rents for space and salaries for the many humans who have to staff those stores—can no longer compete.

The implosion of mainline retailing has multiple causes, but Amazon has clearly been a change agent that has accelerated the sector’s challenges and hastened the demise of some once dominant players. Retail stores are closing at a record rate—as many as 8,000 this year. That’s thousands more than in 2008, the previous worst year on record, which bore the brunt of a whole-scale economic collapse. Those stores employ hundreds of thousands of people, and when those jobs disappear to e-commerce, they don’t come back.

So does Amazon create value by seamlessly distributing goods, or destroy it by demolishing jobs? The answer, of course, is both. While Washington focuses almost entirely on the last gasps of manufacturing and coal mining employment, e-commerce and Amazon threaten far more jobs. Yet Amazon also offers the potential of far more affordable goods at lower costs. It truly defines creative destruction.

The benefit of those goods extends beyond convenience. Home delivery frees up time and gasoline money. Providing easier, cheaper access to nourishing Whole Foods products could save many billions of dollars in improved health and nutrition. And Amazon has shown that it is not determined to eradicate hardline retail, or the jobs that come with it. Bezos seems to understand the human need for social shopping, and the continued place it will have in our lives; hence his buying an actual supermarket chain and opening a series of bookstores, similar to the ones it spent so much time trying to drive out of business in its early years.

Futhermore, the model Amazon is displacing is not some Platonic ideal of economic health. In our sentimental rush to defend mall culture, we should remember that malls arose from the explosion of suburbs in the 1970s, a development that led to the precipitous decline of towns and smaller cities across the United States. Strip malls and big-box retailers destroyed communities by eradicating small businesses in traditional downtowns. We should not now bemoan the disruptions of those malls at the hands of a company that offers far more choice and better quality at far less costs and greater convenience.

We don’t yet know, of course, what jobs will replace the ones being made anachronistic by e-commerce. We know what is being lost, with only a few inklings of how the gains will be distributed. The promise of a digitally-enhanced, voice-activated home where you only have to say what you need before your accounts are debited and goods delivered is both a utopian and dystopian vision. It is fitting that Amazon is at the apex of those changes, driven both by a utopian ambition and a dystopian drive to dominate competitors.

The purchase of Whole Foods introduces those divergent urges to a new, intimate arena: food, which everyone needs and everyone consumes. If the company can succeed at the grandest level, it will result in better food for everyone—but it may take an unsavory path to achieving that goal. Amazon’s drive is as fraught with risk as it ever was, but looking a decade ahead, the result is likely to be enhanced quality of life for more people than ever before, even as the changes continue to be unsettling and tumultuous.

more info: https://www.wired.com/story/amazon-whole-foods-expansion/