What you may have missed when Amazon bought Whole Foods

Amazon seems to love Swell’s portfolio companies.

When Amazon purchased Whole Foods Market, there was a tidal wave of press coverage. Reporters, stock analysts, everyone was speculating about how this acquisition would impact the Whole Foods’ brand and reshape the grocery landscape - heck, I even had a chat about it with one of the baristas at Philz Coffee. To be sure, Amazon’s competitors have a lot to be worried about. Its CEO, Jeff Bezos is known to leverage technology to upset the status quo. But this Whole Foods Market deal isn’t the only thing Amazon’s competitors have to worry about. Here are some other things you may have missed while everyone was talking about Amazon’s purchase of Whole Foods Market.

First, on the day that the Whole Foods deal was announced, it was also reported that Amazon was granted a patent for technology that could be used to prevent “showrooming.”  Showrooming is when consumers go into a store to buy an item and use their mobile devices to price compare.  Amazon’s technology patent could have 3 effects:

• It could prevent brick-and-mortar retailers from using tech in their stores that could stop shoppers from comparing prices of in-store products to those from an online provider, like say...Amazon.
• Amazon could theoretically use this same technology to prevent shoppers from comparing competitor prices in its own brick-and-mortar stores. No discount kombucha for you!
• Amazon could license the use of this technology to its competitors – in effect, forcing them to pay for the ability to compete. Very Goodfellas stuff.

Even earlier this year, in April, Amazon reached an agreement with hydrogen and fuel-cell maker, Plug Power, Inc. which is part of our Green Tech portfolio. The agreement states that upon purchasing $600 million in goods and services from Plug Power, Amazon would have the right to take a 23% stake in the company. Why does this matter, you might ask?

Plug Power’s fuel cell powered forklifts have a significant advantage over lead-acid battery-powered forklifts. Here’s how:

• At a distribution center, battery charging infrastructure takes up to 10% of the center’s footprint – space that can be repurposed for more good’s storage by switching to fuel-cell powered forklifts.
• Forklifts powered by fuel-cells are faster than those powered by lead-acid batteries. This is because lead-acid batteries voltage drops the longer they’re used. This causes productivity declines.
• Switching to fuel cells would also reduce labor costs. Lead-acid battery recharging and swapping require dedicated employees. With fuel-cell powered forklifts, no additional labor is needed as the drivers can refuel the hydrogen themselves.

Once again, Amazon has put its competitors in a tight spot. They can either choose to reap the productivity advantages of switching to Plug Power’s fuel-cell technology, or they can opt out and operate less efficient distribution centers. Either decision is a benefit to Amazon.

Amazon is in effect saying to the competition, “Rock? Meet hard place.”