Hardware Retailing

AUG 2017

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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August 2017 | HARDWARE RETAILING 59 Amazon's Growing Empire In the 23 years since Amazon started, the online retailer has evolved from a bookselling website to an e-commerce giant that sells everything from AA batteries to Zyrtec. Much of its success is due to the company's intense focus on offering new, innovative technology and a vast array of products. Strong sales without a brick-and-mortar presence have always helped set Amazon apart. Yet in June 2017, Amazon did the unexpected. The company announced it would acquire Whole Foods, which includes about 450 physical stores, for $13.7 billion, initiating the largest acquisition in the online retailer's history. The deal follows years of Amazon building up its online product offerings and bolstering its business through acquisitions that have primarily been technology related. Because Amazon started out as a book retailer, its 2008 purchase of Audible, the large audio book producer, could be considered a natural extension of its initial model. Some of Amazon's subsequent acquisitions diversified that model. In 2012, Amazon purchased robotics business Kiva Systems for $775 million, which allowed the online retailer to use robots to automate order picking and packing. As of 2015, the retailer had as many as 30,000 warehouse robots. In 2014, Amazon purchased the video-streaming site Twitch for $970 million and entered the markets of video streaming and esports (a form of multiplayer online gaming). The retailer also added a video-processing company called Elemental Technologies to its ranks in 2015, as well as Annapurna Labs, which has been used to aid Amazon's cloud computing unit Amazon Web Services. The web services are the backbone of many internet businesses. Amazon's purchase of Quidsi, a company that hosted websites such as Diapers.com, was a $500 million deal. Amazon bought Quidsi in 2010 in a price war with Walmart. Quidsi co-founder Marc Lore ended up working for Amazon for over two years following the acquisition. He left in 2014 to help start an e-commerce company called Jet.com, which Walmart bought in 2016. Lore began working for Walmart as part of the Jet.com deal. Earlier this year, Amazon shut down Quidsi, saying the website wasn't profitable. However, analysts speculate the decision boiled down to a rivalry between Lore and Jeff Bezos, Amazon co-founder and CEO, according to an article by CNBC. The CNBC article suggests Amazon wanted to focus its efforts on its own website, rather than on other sites, like Diapers.com. "They didn't buy service with Quidsi, they bought domain names and customer lists," analyst Michael Pachter says in the article. A New Strategy Amazon's most recent and expensive purchase of Whole Foods may be how the e-commerce giant will compete in brick and mortar against Walmart, according to an article by The Atlantic. "Amazon is trying to become Walmart—not just an online megalith, but also a physical retail powerhouse with dynamic pricing and stocking strategies—faster than Walmart can become Amazon," the article says. Amazon has been successfully adding to its service and product offerings through investments in areas such as entertainment and smart home technology. Grocery, enhanced by Whole Foods, adds another dynamic layer to those offerings. Customers can stream a movie from their couches, while ordering food that is running low in their pantries. With the acquisition of Whole Foods, Amazon now has brick-and-mortar locations that may act as additional fullfillment centers for products. Amazon

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