The recent announcement that Amazon will acquire Whole Foods in a deal valued at $13.7 billion rocked the grocery sector and sent shockwaves through the retail industry. The transaction is a sign that merger and acquisition (M&A) activity is on the rise as experts predicted. But more significant in the long term, it underscores the importance of information in the data-driven economy.
Today, a company’s value isn’t measured by its tangible assets alone. Data is the new currency of business, and Amazon’s genius with data and automation are the primary reasons the ecommerce giant is now aiming to disrupt yet another industry. While media reports speculate about drone-delivered kale, data integration is the big story.
In some ways, the Amazon-Whole Foods deal seems like a mismatch. Amazon is a favorite of bargain hunters, whereas Whole Foods products are notoriously expensive. Amazon has experimented with grocery delivery via Amazon Fresh in some cities, but the acquisition of Whole Foods, with its high-quality products that attract upscale shoppers, represents a massive scale-up of Amazon’s grocery ambitions.
Whole Foods locations tend to be in high-rent urban enclaves, whereas Amazon keeps prices down in part by building enormous warehouses away from high-density areas and using mechanization, logistics and data analytics to speed the delivery process. So, if the acquisition happens, how will the post-merger operating units reconcile these opposing traits?
As with all modern M&A transactions, data integration and management will play a key role, both in the success of the acquisition and in post-merger operations. Here are three ways Amazon might use its new wealth of data:
Integrate data to develop more accurate customer profiles and targeted offers: ABC News noted that “Amazon could also get a better picture of customers by marrying data from Amazon and Whole Foods’ loyalty programs.” The article also cited a Gartner retail analyst, who observed that data could be used to create more relevant offers and drive sales higher.
Remove friction from the in-store buying process for cross-over customers: Amazon makes buying online as easy as a single click. Some analysts speculate that Amazon could streamline the Whole Foods checkout process, using barcode data to manage inventory and charge customers’ Amazon accounts instead of an in-store payment in exchange for a discount.
Device tie-ins to improve stickiness: The grocery business is an $800 billion-dollar industry, but margins are small. Customer loyalty is incredibly important, and Amazon could use the spike in sales of its artificial intelligence assistants, Echo and Echo Dot, to keep customers coming back for more Amazon products, including quality perishables at Whole Foods.
If the transaction takes place as planned in the last half of 2017, undoubtedly many more examples of how data can be used to strengthen one or both operating units will come to light. But taking full advantage of an influx of data from M&A activities requires planning and expertise. An experienced M&A team is essential, which is why it is advisable for companies that don’t have staff who specialize in M&A data integration projects to find a managed services provider that does.
A managed services approach like Liaison’s allows merging company IT teams to handle the overload that accompanies an M&A transaction while making sure projects that are vital to M&A success don’t fall through the cracks. With an expert managed services team, merging companies can rely on their partner to handle tasks like initial assessments, integration, testing, knowledge transfer and customization requests.
Before Amazon and Whole Foods — or any companies completing an M&A transaction — can get an accurate view of their combined operations and generate the insights they need to make sound business decisions, they must break down data silos and integrate information from multiple sources on a unified platform. Liaison’s ALLOYTM Platform is perfect for that job, built to power business analytics and guaranteed compliant with industry data security and privacy standards.
It’s too soon to predict whether Amazon’s acquisition of Whole Foods will succeed in changing the way people shop for groceries. But it’s not too soon to conclude that any M&A transaction will be more successful if the merging companies have the right platform and a team of experienced professionals to handle data integration and management issues. Data fuels innovation, and companies that handle data competently have an edge before, during and after an M&A event.