The Everything Store Expands
LISA WERNER/GETTY IMAGES
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.