After transforming many areas of contemporary everyday life, the digital-industrial complex is getting ready to “disrupt” — to use one of Silicon Valley’s favorite words, which they use as a term of endearment — the world of food. In recent months, in the U.S., there’s been a strong acceleration in the convergence of supermarkets and e-commerce stores, mainly due to a string of acquisitions of big names in food distribution by digital giants.
The banner merger was that between Whole Foods and Amazon. The move by the ubiquitous Seattle merchant got many people talking, particularly because of the type of supermarket it acquired.
Whole Foods, which sells food without hydrogenated fat, food colorings, artificial flavorings or artificial preservatives, was born in the late ‘70s by the merger of two natural food shops in Austin, Texas, and, under the leadership of John Mackey, has grown by acquiring “organic food” markets in different regions to become a food and lifestyle brand on a national scale — and also beyond, as there are branches in Canada and England. It is comparable to the Italian Eataly model (also on account of the combination between product sales and restaurant services), but with a reach as widespread as Starbucks.
While it has helped to significantly expand the organic food market in America, Whole Foods has been criticized by proponents of sustainability such as Michael Pollan for not promoting local supply chains with its global inventory. Mackey also makes no secret of his libertarian views, has said he does not consider medical insurance for employees a right and has never allowed his workforce to unionize.
The chain is particularly derided by those who note its inflated prices (and the equally inflated self-importance of those who shop there). Whole Foods has nevertheless opened up new horizons, social and food-related, for the emerging millennial generation, as it took root in gentrified neighborhoods in the major American cities, particularly close to affluent communities of young professionals and creatives. In the age of top chefs, cooking shows and an emerging food culture in America, Whole Foods has become a universally recognized cultural brand.
A combination of consumerism and a cultivated image has made these stores markers of urban renewal. The opening of a Whole Foods supermarket can give a boost to the real estate market in the surrounding neighborhood all by itself. But its elitist character and inevitably higher prices have led, after years of constant expansion, to a less than rosy bottom line, which cleared the way in August for the takeover by Amazon.
For the Seattle giant, this is another prestigious trophy added to the collection of the e-commerce colossi, alongside names like The Washington Post and Amazon Studios, the division that produces films and original shows for streaming.
The first decision of the new business entity was to lower prices to levels competitive with those of “regular” supermarkets. This prospect has given chills to its competitors, in a sector in which profits are tied to a traditionally thin margin. The half-dozen other national chains are worried about Amazon’s enormous pockets, a company known for having applied a scorched-earth policy to secure control of the market, starting with books, as shown by the trail of small bookstores sent into bankruptcy in its wake.
For Amazon, which is built on deliveries, Whole Foods is now an opportunity to expand its real estate portfolio and its operations in the physical sphere. It had already launched the Amazon Pantry service, with which “Prime” customers can order non-perishable goods to be delivered in parcels to their doorstep. Recently, vans with the “Amazon Fresh” logo have taken to the streets of a number of pilot cities for the new fresh food home delivery service. Now, owning over 400 Whole Foods locations, Amazon has a widespread distribution network readily set up.
But this is probably just the beginning. In the first months of this year, in Seattle, the company had already opened, on a trial basis, a few Amazon Go shops, convenience stores where customers who have downloaded the respective app can come in, pick up the desired products and go out without going to the cash register (which doesn’t in fact exist). Their Amazon account is automatically charged from their phone, thanks to radio tracking sensors (RFID chips) and the phones’ geolocation features.
For decades, large retailers have been perfecting carefully developed strategies to promote consumption and sell merchandise, from the design of the displays to the physical layout of the products and the restocking frequency.
Nowadays, the algorithms and data mining abilities that a digital giant like Amazon has at its disposal open up the prospect of strategies that are far more detailed. The possible combinations resulting from a digital platform, mobile phones and databases are endless, from assisting in payment to the selection of products through the inevitable “shopping tips,” nowadays tailored to the individual customer based on the data the company has at its disposal.
It is enough to notice the advertisements that haunt us for days after even the most cursory search on Amazon to begin to get an idea of the likely future of supermarket shelves, possibly in combination with smartphone screens and electronic price indicators.
The latter component may show itself to be crucial for implementing a “flexible” pricing policy, where the cost of the products might not only change according to season but even according to the time of day, the ambient temperature, or an endless combination of other parameters set by the merchant. If this seems implausible, just think about how we have become used to buying, for instance, airline tickets in the online era, and about the drastic price changes that these can undergo almost hourly, or indeed about Uber’s fares which increase during rush hour — all according to the dictatorship of supply and demand and the hyper-libertarian orthodoxy of Silicon Valley and the gig economy.
A company like Amazon would even be able to calibrate price fluctuations according to the profiles of individual consumers, identified by the thousands of pieces of data that various platforms have on each of us (Facebook has around 100 data points on each of its two billion users, including income and the value of the homes they own). As a result, the algorithms could also assess, in real time, to which consumer, or class of consumers, they should offer any discounts or special offers. In all, it is not surprising that such a “morbid” relationship with the consumer has ultimately reached the areas of food and the supermarket, where our daily and most “personal” shopping, involving habits and basic needs, takes place.
There was an immediate countermove by another all-encompassing company: Google signed a collaboration agreement with Walmart, clearly with the thought of implementing strategies similar to those of its competitor. The idea is the same: to apply the “life bundle” model developed by Amazon — a subscription, similar to that for premium TV packages, with which the consumer relies on the one provider for their each and every need.
For citizen-consumers, who, in the name of convenience, have already delegated to digital automation their consumption of entertainment, culture, services, information, communication, and memories, another mammoth transfer of control to silicon oligopolies looms.
