The Oldest Innovation: Monopoly

Amazon’s purchase of Whole Foods is further evidence of its plan to corner the market on retail. It’s about consolidation, not innovation.

In fact, controlling an industry, otherwise known as a monopoly, is the oldest innovation known to business, perhaps because it’s the most elegantly simple:

Dominate a market and its pricing, and there’s profit to be made by taking out costs

It’s what Walmart has been doing for years. Just ask any vendor how much fun it is to regularly have the company’s buyers demand lower prices while outsourcing more costs and responsibilities (reporting, system integration, delivery requirements and lots of penalties when things go wrong).

This horrible process often culminates in Walmart replacing the product(s) with its own private label brands (or no-name brands that meet the same specs), while keeping prices as high as possible without letting competitors undercut them.

The Amazon vs. Walmart battle is about who controls that margin.

You wouldn’t know it from the media coverage of the Whole Foods deal, though.

The most common storyline focuses on integrating online and geophysical retail, making frequent references to Amazon’s experiments with “click and collect” ordering and automated checkout, and Walmart’s aggressive online investment and acquisition strategy (it bought fashion site Bonobos on the same day of Amazon’s announcement).

But the underlying strategy is all about rollup, not rollout

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