Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Tag: whole foods

  • From mail-order catalogues and e-commerce to brick-and-mortar retailing

    It was recently announced that Amazon plans to start opening large brick-and-mortar retail stores that are akin to department stores. They won’t be quite as big. Supposedly they will be around 30,000 square feet. But this is still a meaningful commitment to physical retailing. The first stores of this type are expected to be in California and Ohio.

    On the one hand, this move probably appears counterintuitive. I mean, Amazon is a machine built around e-commerce (though it does already have other physical stores). But on the other hand, you could argue that they are simply following a retailing playbook that was developed over a century ago by companies like Montgomery Ward and Sears.

    Both of these companies disrupted traditional retailing in the late 19th century through mail-order catalogues. Why pay for physical space when you can just mail people catalogues? (Your margin is my opportunity, right?)

    But as we know, eventually these mail-order catalogue businesses turned into brick-and-mortar stores, and they then thrived this way for many years. If you consider e-commerce to just be the 21st century equivalent of the mail-order catalogue, then perhaps this next move by Amazon was always destined to happen.

  • Amazon buys video doorbell company

    So Amazon is buying Ring (they make video doorbells, among other things) for north of $1 billion. Supposedly, it is the second largest acquisition that Amazon has ever made – the first was Whole Foods.

    If you consider that Amazon is also looking to enter the delivery business, it should be obvious that they want to control everything related to the home delivery process.

    For one, it likely enhances Amazon Key and helps with the “porch pirate” problem. Apparently Amazon has had to restrict same-day delivery from some high crime neighborhoods because of this exact problem.

    And there’s already speculation about what this could mean for grocery deliveries. Amazon needs to find a frictionless way to get your food orders into your refrigerator. 

    There are also many possible tie-ins to Alexa/Echo. It’s probably safe to assume that Jeff Bezos sees a lot more than just a doorbell with a camera in it.

  • Two-hour grocery delivery

    Today it was announced that Amazon is planning to launch its “Prime Now” service in Vancouver and Toronto this November and January, respectively. 

    The pilot program will offer two-hour deliveries for members and, according to the Wall Street Journal, will be be heavily focused on groceries. 

    It’s worth noting that most of Whole Foods’ stores in Canada (now owned by Amazon) are in and around Vancouver and Toronto. And that Amazon has already started lowering prices to make those stores more competitive.

    Right now a “Prime” membership in Canada costs CAD$79 per year. I’m not sure if the price will change at all for “Prime Now”, but let’s assume for the sake of argument that it won’t. 

    If this service was available to you today (or if you’re in a city that currently has it), would you (do you) use it? I would love to hear your thoughts in the comment section below.

    Two common objections around online grocery shopping are that many people want to touch and feel the goods before they buy and that perishable deliveries are a challenging thing to coordinate.

    I think I can work around those objections and would certainly try this today if it was available in Toronto. What about you?

  • The grocery wars: Why Amazon bought Whole Foods

    The big news on Friday was that Amazon has agreed to buy grocery chain Whole Foods for $13.4 billion.

    Some people – such as Bruce Berkowitz, who manages the $2.3 billion Fairholme Fund and who is the second largest shareholder of Sears Holdings Corp. – believe that this says to the market that “there is a need for physical space in retailing.” Everything can’t be online.

    I obviously agree that there’s value in real estate / physical locations, but I don’t see this as Amazon capitulating in any way. This is not Amazon saying to itself: “Well, AmazonFresh hasn’t grown as quickly as we’d like, so let’s forget this ecommerce thing.” No, Amazon is determined to win.

    Indeed, the fact that shares of supermarket operators tumbled across the U.S., Canada, and Europe, probably signals that the market is expecting something other than the status quo following this acquisition. 

    All of this is a big deal because grocery is a big deal. 

    There’s a reason Wal-Mart ramped up grocery (and now derives over half of its revenue from it). There’s a reason why drug stores are proliferating across our cities (and expanding their grocery offerings). In Toronto it’s Shoppers Drug Mart and Rexall. In New York it’s Duane Reade.

    We buy groceries frequently and we overwhelmingly still buy them in person. So online grocery is the holy grail of ecommerce of right now. Everyone wants to nail it first.

    How does this acquisition help Amazon do that? Here are two thoughts.

    1) The real estate still matters. 

    Even in a world where most groceries are purchased online, you need still need physical distribution centers in close proximity to lots of customers.

    Whole Foods has more than 460 stores across the U.S., Canada, and Britain. Their formatting would obviously evolve, but the bones are there for Amazon to leverage.

    Startups such as Instacart have tried to circumvent this requirement by fulfilling only the delivery portion. And arguably their pitch to other grocers may now be stronger: “You need to offer this to compete with Amazon/Whole Foods.” (Instacart currently provides this service Whole Foods.) But you can bet Amazon will want to squeeze/control this part of the supply chain.

    2) The data.

    Many analysts are already assuming that Amazon will work to automate away cashiers, similar to what it’s trying to do with its Amazon Go concept store. If you combine this with other offerings such as 15 minute pickup (Amazon Fresh PIckup), you can easily imagine a world where us customers get weaned off of in-person shopping.

    For example, if my regular grocery store made better use of its data, it would probably come to the conclusion that I generally buy things like orange juice, milk, and avocados (I’m a Millennial) every X days. I’m sure if you look at my shopping habits, I’m pretty predictable. Whenever I go to a new store it always takes me 100% longer to shop because I don’t generally wander. I target my stuff.

    Now if I could get somehow prompted to re-order my regular items every X – 1 days, chances are I would gladly tap order. And now I’m shopping for groceries online. Get ready for the grocery wars.

  • How I built this

    My friend Dan just introduced me to a terrific podcast called, How I Built This. It’s all about “innovators, entrepreneurs, and idealists, and the stories behind the movements they built.” As soon as he told me about it I immediately pulled out my phone and hit subscribe.

    You will recognize many of the brands and entrepreneurs featured on this podcast. The companies span everything from Whole Foods and the Corcoran Group (real estate) to Kate Spade and Instagram.

    I’m not that up on podcasts. I think it’s because I don’t really drive that often and I don’t have much of a commute. Podcasts are great when you’re sitting in traffic, which is something people here in LA obviously do a lot of.

    But I’m going to make time to listen to this one. I have so much respect for anyone who has built something from nothing. Building and creating is what moves us forward.