The announcement on Friday that Amazon is buying Whole Foods set off a wave of takes about Amazon vs. Walmart and Amazon’s 400 new distributions centers for grocery delivery, but Tom Krazit at GeekWire nailed another major aspect of this deal
: Amazon now has a huge data source on brick-and-mortar shopping behaviors that were previously a blind spot to the company. And, as I wrote last month about Facebook, data reigns king in the age of artificial intelligence.
Amazon used to know a lot about how people shop online and how its e-commerce distribution channels operate. With Alexa, it’s also learning a lot about how people talk, what they put on shopping lists and, more generally, what they’re interested in. Using all that data, it’s already using machine learning to optimize and improve these businesses.
Now Amazon will also a lot about how people shop for groceries in the physical world. It will know what they buy and when, what they buy together, and what they buy in-person that they don’t buy online (even if they could). It will understand how grocery stores operate and how grocery distribution channels works. And then it will use machine learning to optimize these things, too.
I don’t know if Seattle-area neighbor Costco is quaking in its boots, but other grocery chains probably should be. Should Amazon push Whole Foods to revamp in terms of pricing and product selection, they are about to, to use a politically incorrect term, get Ubered. Amazon had the AI expertise
, and now it will have the data to make this happen.
Instacart, whose customers shop at Whole Foods a lot, has been publishing some interesting blog posts lately about shopping data
, deep learning
and grocery-delivery logistics
. Given its tech-centric nature, maybe the correct analogy here is that Instacart is Snapchat, and that it could very well be Facebooked (or Instagrammed).
In his GeekWire
post, Krazit also suggests that Amazon will now have the data and expertise to offer a cloud-based retail service if it’s so inclined. That’s certainly possible —the smart money is in vertical AI solutions, as Bradford Cross explained on the ARCHITECHT Show podcast
last month, and recently in a conference talk
—but Amazon would have to believe it can deliver this without cannibalizing its own business in the process. Amazon Web Services has been venturing much more deeply into the application space
over the past couple years (more on that further down), but it hasn’t offered any vertical-specific offerings I can think of, much less in a space where Amazon already operates.
However, speaking of the cloud, another interesting data angle in the Whole Foods acquisition is that Whole Foods is a big Microsoft Azure customer. According to a story in The Register
, Whole Foods is a major user of the Azure Active Directory service, which it uses to provide its 90,000 employees with single sign-on. It seems safe to assume an Amazon-owned Whole Foods will not stay on Microsoft’s cloud for any longer than it has to (although, FWIW, Zappos was still struggling with a migration to AWS as of late 2015
) but any data Whole Foods has on where the Azure service excels and lags could also be valuable.
Like many people, I have mixed emotions about Amazon in terms of what it wants to do and how it goes about doing it. But I’m thinking about it a lot differently today than I was on Thursday. To me, it’s now the ultimate guinea pig for the power of AI to transform business—a cliche we hear a lot but that has arguably never been so publicly put to the test. The economics of the grocery business have been well-understood for decades, so we’re going to see firsthand how Amazon’s approach changes things.