• Home
  • Blog & News
  • Insights from Amazon's acquisition of Whole Foods to build our own businesses

Insights from Amazon's acquisition of Whole Foods to build our own businesses

By Pavlo Phitidis  

Online digital retailer, Amazon spent $13. 7 billion to buy 401 brick-and-mortar Wholefoods grocery stores! Why? Has Amazon lost faith in its business model because it doesn’t make any money? Or, is there a bigger plan at play? What can we take out of this to build our own business better, faster and smarter! This week, on The Money Show with Bruce Whitfield, on Radio 702 and Cape Talk interrogated and diagnosed the take-outs that we can apply to grow our business faster and smarter.

Amazon Doesn’t Make Any Money

It’s true. They don’t produce a profit! Importantly, this has been its stated strategy since Amazon was first established. All the funders and backers know about it and yet, they hang in there.

Our take out

Producing a profit when you have plans to grow is robbing your business of funding benefits. Think about it: a third of what you generate in profits goes to tax. If, for example, you produce a R3 million profit, a third of that - R1 million - goes to tax. That’s R1 million that you could have used to invest in accelerating the growth of your business that you would now need to get from a bank or funder – costs and hassles that could have been avoided.

Our Action

To avoid this happening, you need to have a big vision for your business - something that will take you beyond a ‘mom ‘n pop shop’. This big vision needs to be built up into a plan of action. We spoke about this before. That plan of action needs to be activated and focused on ensuring that as you approach your financial year end, you don’t suddenly get surprised that you made a profit and frustrated that you have to pay tax. A good plan acts as a radar system, alerting you to the investments you need to make within the financial year to ensure that your hard earned cash goes to building the foundation your business needs to support the vision.

Snuza founder, Greg Gallagher, held on to his company’s long-term vision, despite a 4 year wait for their device’s CE approval, and is now the proud manufacturer of the only medical device in its category, available in Europe. His patience and big vision is paying off. Check them out here.

Amazon Enters a New Market

For Amazon, brick-and-mortar stores; perishables; fresh foods; fresh produce and a cold chain supply chain is new. My experience of Wholefoods began with delight and ended with frustration. Beautifully presented, exciting food choices ended with me waiting in queues every time and being treated like a number. The personal touch gone and my most precious commodity, time, stolen. Amazon is great at delivering customer experiences! Armed with this mind-set and deployed in Wholefoods could set the new standard for competing retailer who are working off the back foot.

Our take out

The benefits of building customer-centric businesses, a key element of an Asset of Value, is that you build experiences. Experiences are more appealing than products anytime, any day, anywhere. Understanding your customer group allows you to enter into new industries where these customers are buying other products or services but having a terrible experience in the process. If you can overlay your experience, for that customer group, in an industry that engages them, you may well be able to make a big play.

Our Action

It’s said above. Build a customer experience business rather than a product experience business. If you focus on customers you are relevant consistently because if they like or dislike, you will know. If you are customer focused, you will innovate to stay liked. Remember all the time, only if you solve problems are you relevant in business.

Specktank founder, Martin Glauber embraces this idea. A chemical manufacturer, he needed a way to break into the ‘hot kitchen’ industry. In hearing and responding to the terrible, ongoing complaints customers in this industry faced, he innovated a solution to focus on redesigning their experience. With over 7,000 very happy customers today, he uses that same approach to turn a cost into a profit for his customers by introducing a revolutionary new disinfectant product. 

Amazon Has Built an Asset of Value 

Building an asset of value takes time, and Amazon’s CEO and founder, Jeff Bezos, knows this all too well. Amazon’s acquisition and investment strategies are all centered on the three levers of valuation that create capital wealth. By focusing on the customer, Amazon’s created long-term wealth and longevity. 

Our Take Out

If 94,6% of businesses never get sold and there are only two destinations for your business, be concerned. Many smart, hardworking businesses owners invest everything they have into their businesses in the belief that their pay-day will be when they eventually sell their businesses. Statistically, this day never comes about because the way that we, as entrepreneurs build our businesses is very different to building a business into an Asset of Value.

Our Action

We need to understand how to build an Asset of Value. It’s not that hard. Then we need a plan to get their and goals to achieve the many steps it takes to create the three levers of value in our own businesses.

Africa People Mover’sTumisang Kgaboesele takes the same approach – in an industry where his competitors are focused on profits, he’s ensured that his company focuses on the customer, by building a mobile interface between its assets – that’s buses – and public transport users. He is not focused on generating cash returns for himself and his shareholders. He is focused on being the best player in his industry by focusing on customer experiences rather than assets. Sticky customer experiences are the single biggest lever of valuation and through this, he is on track to build an Asset of Value. 

Amazon is a Data Business

Amazon’s biggest asset is not what it sells – it’s the data that they generate and use to lead strategy and innovation. Amazon’s acquisition of Whole Foods creates opportunities to gather even more customer data, in a new sector, and provide holistic insights into purchasing behaviour. 

Our Take Out

Data is invaluable if it’s used since it turns transactions into intelligence. Data can provide you with the roadmap that ensures your growth is in response to the reality of your environment and not your ideas. Ideas unsupported by data can seduce us down very wasteful paths. 

Our Action

Unless we build systems into our business, we cannot generate data. Remember, a system has 6 elements, one of which is measurability. Ideally, your business systems should run across the organization of your business and include marketing, sales, operational, procurement, people and money activities. A system driven business, key to building an Asset of Value, orchestrates all these elements to generate the ideal customer experience.

Lars Vuel and Cape Town Company, Pargo, uses data in a similar way, through its collection point network that makes online purchase delivery more convenient for customers. From the data that they collect, they have evidence that their service leads to more sales for both the customers making their locations available as pick up points and the retailers using their pick up points to reach more customers through their on-line retail stores.

Big moves in big businesses hold insights valuable to us all. Work with us to help get you and your business into that league by building your business into an Asset of Value. 

 

Tags: Asset of Value, Building your Business, Strategy, Scaling, Digitisation

How to Build your Business & Capitalise on a Seemingly Negative Business Environment
The Money Show Building your Business

How to Build your Business & Capitalise on a Seemingly Negative Business Environment

The reality of a recession is sinking in, and it seems the echo chamber of negativity is overwhelming. South Africa’s business...

Read more

How to build a resilient business in a technical recession
Building your Business

How to build a resilient business in a technical recession

Our economy is in the midst of a technical recession and business owners are wondering how to weather this economic storm....

Read more

Marketing for Business Growth: Keeping your Customer Acquisition Cost in check
The Money Show Business Growth

Marketing for Business Growth: Keeping your Customer Acquisition Cost in check

You’re not alone. It’s becoming more and more difficult to generate leads, turn those into customers, and grow your revenue....

Read more

Product businesses in the industrial sector need to build differently to survive and thrive
Building your Business Business Growth

Product businesses in the industrial sector need to build differently to survive and thrive

Keeping water flowing through the kilometres of underground pipes keeps all players in water infrastructure awake at night,...

Read more

How to Build Your Business by recruiting the Right People to do the Right Thing at the Right Time.
The Money Show Building your Business

How to Build Your Business by recruiting the Right People to do the Right Thing at the Right Time.

As a small business owner, your biggest investment will be your staff. How you hire, who you hire, and when you hire, will...

Read more

Turning the talk of your Business Strategy into the Walk of Execution and Results
The Money Show Business Strategy

Turning the talk of your Business Strategy into the Walk of Execution and Results

In recent meetings with frustrated business owners, Pavlo Phitidis picked up on a significant trend – a high level of complaints...

Read more

Why, When and How to Sell your Business.
The Money Show Selling your business

Why, When and How to Sell your Business.

Every business only has two destinations: it closes, or you successfully sell it. Globally, however, 94.6% of all businesses...

Read more

How to build your business through delegation
The Money Show Business Growth

How to build your business through delegation

Your business journey most often begins with just you. Along the way, however, as you figure out how to build your business,...

Read more

Managing Business Growth – The Killers of Business Growth
The Money Show Business Growth

Managing Business Growth – The Killers of Business Growth

Ask any business owner what they’d like for their business, and they’ll say “Growth”. But managing business growth isn’t...

Read more

KVD: A fisherman’s tale
Building your Business Business Growth

KVD: A fisherman’s tale

American Kevin VanDam is one of the top-ranking bass fishermen in the world with two Major League Fishing Cups, four Bassmaster...

Read more

How to build your business: Break it to build it throughout the growth cycle
The Money Show Building your Business

How to build your business: Break it to build it throughout the growth cycle

You build your business within the context of your business environment. When your business environment changes more rapidly...

Read more

More small business growth insights from GrowCo
The Money Show Business Growth

More small business growth insights from GrowCo

On The Money Show with Bruce Whitfield, Pavlo Phitidis shared further small business growth insights, gleaned from attending...

Read more

Learning lessons from the GrowCo conference

Learning lessons from the GrowCo conference

GrowCo gives attendees the opportunity to learn from the best in the industry with more than 600 people attending – including...

Read more

Reflections on Small Business Growth from GrowCo
The Money Show Business Growth

Reflections on Small Business Growth from GrowCo

On The Money Show With Bruce Whitfield, Pavlo Phitidis shares what he learnt about small business growth, scale, competition,...

Read more

Characteristics of a business owner’s spouse can  be make or break
Asset of Value Business Development Family Business

Characteristics of a business owner’s spouse can be make or break

What’s it like to be the significant other or the spouse of a business owner? People generally believe that when you are...

Read more

Turning a sweet start into a smart start: Making money from honey with your start up business
Business Opportunities The Money Show Start Up

Turning a sweet start into a smart start: Making money from honey with your start up business

What happens when your small side business suddenly shows a whole bunch of potential? How do you turn a hobby into the startup...

Read more

Creating a Succession Plan for your Family Business
Succession Business Succession Succession planning

Creating a Succession Plan for your Family Business

The statistics are terrifying. A mere 28% of family businesses, across the globe, successfully move from founder to next...

Read more

How to break a bad deal and not break your business
The Money Show Business Exit Exit strategy

How to break a bad deal and not break your business

Britain broke market access with BREXIT, and Trump broke the Iran deal with just a tweet, but neither seemed to consider...

Read more

Strategies for Business Growth that Go Beyond a Blind Belief in Brand Value
The Money Show Business Strategy Strategic Planning

Strategies for Business Growth that Go Beyond a Blind Belief in Brand Value

No business is ‘too big to fail’. Blind idealism didn’t work out well for Kodak, and now another iconic brand is filing for...

Read more

Identifying and Preventing Burnout when You’re a Business Owner
The Money Show Growing business value Building your Business

Identifying and Preventing Burnout when You’re a Business Owner

Burnout creeps up on you like the Dementors of Harry Potter fame. You may not see it at first, but it slowly takes over and,...

Read more

Big Questions from Business Owners Like You
The Money Show Growing business value Growing Business Systems

Big Questions from Business Owners Like You

The Money Show with Bruce Whitfield, Pavlo Phitidis set out to answer some big questions from business owners, like you:

Read more

Small Business Financing: To Debt, or Not to Debt?
Business Opportunities The Money Show Business Growth

Small Business Financing: To Debt, or Not to Debt?

Finding the right small business financing solution for your growing business is critical. Is going into debt the right option...

Read more

How to Protect Your Margins & Grow Your Business in a Cost Inflationary Environment
The Money Show Accelerating Growth Business Growth

How to Protect Your Margins & Grow Your Business in a Cost Inflationary Environment

Everyone is beginning to feel the pressure of an increase in VAT, petrol levy, and other price increases. Rising costs will...

Read more

The Key Components of Collaboration
The Money Show Building your Business Business partnership

The Key Components of Collaboration

While we’ve been looking to fill 13 positions within our company, Pavlo has also been dealing with several international...

Read more