First and Best Customer

This is an excellent article discussing Amazon’s strategy with the Whole Foods purchase and why most people aren’t looking at it the right way.

The Amazon fulfillment centers for product distribution and AWS for cloud computing are large scale projects. They have huge initial costs but benefit tremendously from scale. One reason they succeeded is that Amazon itself was the “first and best customer” of those services, guaranteeing large scale.

Amazon is building out a delivery network with itself as the first-and-best customer; in the long run it seems obvious said logistics services will be exposed as a platform.

This, though, is what was missing from Amazon’s grocery efforts: there was no first-and-best customer. Absent that, and given all the limitations of groceries, AmazonFresh was doomed to be eternally sub-scale.

That’s where Whole Foods makes sense. If Amazon wants to build Amazon Grocery Services, they need a first and best customer. You don’t normally think of an acquisition in terms of buying your customer, but that’s what just happened.