Amazon Effect

Amazon Effect
June 21, 2018 No Comments Blog Richard Kochersperger

Amazon’s Whole Foods deal has sent some retailers into the waiting arms of Google

  • Amazon’s acquisition of Whole Foods has rattled the grocery industry, leading to a spate of ecommerce deals.
  • However, it has also brought new business models and partnerships for Google.
  • As one former Google employee puts it: the Whole Foods deal was a “real wake-up call.”

Jeff Bezos and Larry Page

Getty Images; David Paul Morris | Bloomberg | Getty Images
Jeff Bezos and Larry Page

One year ago Saturday, Amazon announced it would take over Whole Foods in a $13.7 billion deal that shook the grocery industry.

Since then, a number of e-commerce start-ups have scored paydays from big retailers. Walmart bought Flipkart, Target acquired Shipt, and Kroger invested in Ocado, for example.

But there’s been another surprising beneficiary in the tech world: Google.

In the last year, the search giant has become an increasingly attractive partner for retailers looking for ways to compete with Amazon, allowing it to explore new business models and alliances.

For example, Target, Walmart, Costco and others all agreed to a new advertising program with Google that makes their products appear in search and through its smart, voice-activated Assistant at the same time, with a universal shopping cart that routes purchases through its Express shopping delivery service. Instead of paying for an ad, the retailers now have to give Google a cut of each purchase. It’s an interesting new model for Google and helps retailers stay on par with Amazon by giving consumers a simple, consistent purchasing process.

And earlier in June, the search giant announced a fresh partnershipwith French supermarket giant Carrefour to sell its groceries through Google’s shopping site and Home smart speaker.

For retailers, partnering with Google on shopping offers visibility and consumer convenience. For Google, its shopping service is crucial in helping it win back product searches from Amazon and stay relevant in the voice-powered future of e-commerce.

A $13.7 billion “wake-up call”

Amazon’s Whole Foods deal had a ripple effect, according to Joe Rosenberg, a former strategic partnerships specialist for Google Shopping.

“It was a real wake-up call,” Rosenberg, who left Google in April to launch an e-commerce consulting firm, tells CNBC. “Deals we’d been discussing for years were suddenly fast-tracked to retailers’ C-suites.”

“You do not want to give Jeff Bezos a seven-year head start.”
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Guru Hariharan, CEO of ecommerce startup Boomerang, says that there’s been a kind of perfect storm where retailers are worried about losing sales to Amazon while Google’s worried about losing product advertising.

“The Whole Foods acquisition created a tremendous amount of urgency in the market,” Hariharan tells CNBC. “Both sides are feeling pain. If you’re fighting the same enemy, maybe you can figure something out.”

Amazon recently partnered with French retailer Monoprix to launch grocery delivery in Paris, which also helped spur Google’s Carrefour deal, according to SunTrust analysts.

“We believe this is a continuation of a trend we’ve seen domestically where Google partners with offline retailers to bulk up their ecommerce offerings while giving retailers a stronger distribution channel online to better combat Amazon,” analysts wrote in a note to investors on Friday.

Amazon’s acquisition has also helped Google’s cloud business.

Carrefour’s agreement with Google includes the use of its Google Cloud tools, and several other major retailers including Kroger and have moved at least part of their business to Google Cloud since the Amazon-Whole Foods deal went down.

As Cloud chief Diane Greene told an audience at the Goldman Sachs Technology and Internet Conference in February, people used to be scared Google was going to compete with them, but that fear has diminished as Amazon’s ambitions have grown. “We’re really clear about what we’re doing and not doing. And now everybody is looking at Amazon and, like, that’s why we got so many retailers right away….”

How has Amazon transformed Whole Foods one year later?

How has Amazon transformed Whole Foods one year later?  

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