• 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. 

 

How to write the right kind of business plan
Business Opportunities The Money Show Business Systems Business Growth Business Plan

How to write the right kind of business plan

I’ve recently read through oodles of business plans, with a sample of ten showing me that: 4 were applying for growth funding;...

Read more

A Succession Planning Strategy for Your Business
The Money Show Succession Business Exit Business Succession

A Succession Planning Strategy for Your Business

The resignation of Robert Mugabe and the current race for power within the ANC have highlighted the importance of succession...

Read more

Critical strategies to future-proof your business
Growing business value Business Development Growing Focus Business Growth

Critical strategies to future-proof your business

Even for established businesses, it’s not easy to make sure that you will be ready for whatever might happen in the future....

Read more

How to start a business (or your career) from nothing
The Money Show Creating Time Growing Goals

How to start a business (or your career) from nothing

My recent meetings with people across the country have revealed that we have so much human potential, and yet such low morale....

Read more

Learning Resilience, to Build your Business during Tough Times
The Money Show Growing business value Building your Business Growing Accelerating Growth

Learning Resilience, to Build your Business during Tough Times

Simply reading the news headlines can be downright distressing, and government’s lack of adequate response towards corruption...

Read more

How to build your Business into an Asset of Value that is ripe for selling
Growing business value Asset of Value Sales Accelerating Growth

How to build your Business into an Asset of Value that is ripe for selling

Every business owner should be concerned about whether they will be able to sell their business for a good return when they’re...

Read more

What to do when you’ve made the wrong investment for business growth
In the News The Money Show Growing Strategy Accelerating Growth

What to do when you’ve made the wrong investment for business growth

Earlier this week, the South African Minister of Finance presented the Medium-term Budget, and the news was somewhat disheartening....

Read more

Get with the Aurik programme to ensure company growth
Growing business value Business Development Building your Business Company growth

Get with the Aurik programme to ensure company growth

Business owners are bracing themselves for tough economic times with SA’s downgrade to junk status and a gradual economic...

Read more

From a small family-owned business to an internationally recognised operation
Case Studies Business Development Family Business

From a small family-owned business to an internationally recognised operation

How did Liquid Movers quadruple their baseline turnover? The family-owned business joined the Aurik programme to grow its...

Read more

Delegate, you must: if you want to sell your business one day
Asset of Value Sales Business Exit

Delegate, you must: if you want to sell your business one day

Despite what you may think or feel, doing it on your own won’t set you on a pathway to success. You can’t build a business...

Read more

Building successful and sustainable innovative technology businesses
In the News Growing business value Asset of Value Positioning your Business

Building successful and sustainable innovative technology businesses

Aurik CEO and co-founder Pavlo Phitidis was the keynote speaker at the Innovation Bridge event in Midrand recently. With...

Read more

Think big with an Asset of Value framework
AoV Mindset Growing business value Asset of Value

Think big with an Asset of Value framework

Thinking and building big right from the start with an Asset of Value framework, enabled Atomic Oil to achieve a R60m valuation...

Read more

Business Is a Bloody Sport: Why Risk Management is Important
The Money Show Business Survival Accelerating Growth

Business Is a Bloody Sport: Why Risk Management is Important

In 2008, determined entrepreneur, Karabo Songo, established Olive Communications. I first met Karabo during the 2013 Business...

Read more

Spend more time on your business and less time in it with improved business systems
Growing business value Business Systems

Spend more time on your business and less time in it with improved business systems

We have seen a common theme emerging in our recent meetings with various entrepreneurs. As a business owner, you might be...

Read more

How effective business systems can ready your business for sale
Growing business value Growing Business Systems Business Exit Exit strategy

How effective business systems can ready your business for sale

People sell their businesses for many reasons. Fatigue from too many years in the game is one of the most common. They might...

Read more

The Asset of Value Strategy Series
AoV Mindset Pricing Growing business value Asset of Value Building your Business Finding Customers Strategy Employing people

The Asset of Value Strategy Series

Welcome to the Asset of Value Series. As part of the Nedbank Business Accelerator Campaign with 702 this year, our CEO Pavlo...

Read more

Assessing Franchise Opportunities
Business Opportunities The Money Show Growing business value Asset of Value Business Development Accelerating Growth

Assessing Franchise Opportunities

Building your business into an asset of value may include expanding through franchise opportunities. This week, on The Money...

Read more

A Business Strategy to Turn a Dreadful Year into a Success
Growing Strategy Accelerating Growth Business Strategy

A Business Strategy to Turn a Dreadful Year into a Success

This year has been tough for everyone, and there are just 12 weeks left before world of business winds up for 2017. There...

Read more

How to avoid a horror story when buying software for your business
Growing business value Asset of Value Business Development Building your Business

How to avoid a horror story when buying software for your business

Technology is both a driver and frustration for every person and business. Every business no matter what business you are...

Read more

Grow your ideas with business innovation
Growing business value Asset of Value Growing

Grow your ideas with business innovation

South Africa is lagging behind when it comes to innovation, according to a recent World Bank report. But why is innovation...

Read more

Play to your strengths – how the epic Mayweather-McGregor fight can take your business to the next level
The Money Show Growing business value Building your Business Growing

Play to your strengths – how the epic Mayweather-McGregor fight can take your business to the next level

Undefeated welterweight world champion Floyd Mayweather Jnr met mixed martial arts world champion Conor McGregor in Las Vegas...

Read more

Part 2: How to protect your growing business from big business theft
In the News The Money Show Business Development Building your Business Positioning your Business

Part 2: How to protect your growing business from big business theft

The tender trap   After the launch of the BLSA, and the commitments made by big business to entrepreneurs, it sparked...

Read more

Part 1: Big business commitments to small business with the launch of the BLSA
Business Opportunities The Money Show Building your Business Inspiration

Part 1: Big business commitments to small business with the launch of the BLSA

I attended the launch of Business Leadership South Africa (BLSA) – which is headed by former Shell CEO Bonang Mohale – last...

Read more

ANN7 sale should have entrepreneurs asking themselves what their business is worth
AoV Mindset The Money Show Sales Business Exit

ANN7 sale should have entrepreneurs asking themselves what their business is worth

On Monday, 21 August, we spoke to Bruce Whitfield on The Money Show on Radio 702 and Cape Talk of that day’s R450 million...

Read more