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Once The Bear Is In The Tent...

Local papers in Paris are abuzz with speculation about Amazon’s interest in French acquisitions or logistics partners. Since the Whole Foods acquisition, rumors about Amazon are all over the place. Just last month it was Carrefour that they were supposedly buying. Much of the time we find that it is the retailer and their investment banker starting the rumor in order to get Amazon’s attention. However, as long-time owners of Amazon, the recent reports that Amazon has approached privately-held French supermarket operator Leclerc not only seem plausible to us at Echiquier Global, but also fits Amazon’s strategic plan.

It is clear that Amazon wants to expand its fresh food capabilities. They tried over a decade to build it in-house before deciding to buy Whole Foods this year.

Their strategy is to get a local partner so Amazon can both use the existing supply chain at scale and to use the store location as staging points in major cities for the two hour delivery of Amazon Now with fresh produce. Any partnership would also likely include pickup lockers being placed in stores for customers to pick up deliveries (this is what would be attractive to a partner, the additional foot traffic that Amazon could bring).

What every European retailer should be doing right now in their corporate offices and boardrooms is starting to implement their Amazon contingency plan (they certainly should have been preparing for this for several years). Amazon’s game plan is to start small, leveraging a partner to have immediate scale, and then start a margin war through price cuts and costly convenience options and then expand into other complementary retail areas.

We have watched the Amazon Effect decimate US retail and impact seemingly non-related companies like McDonald’s and Starbucks as Amazon just obliterates traditional retail foot traffic patterns.

Amazon has tried several times to find a similar partner in the UK, but has been refused because no one there wants to let the bear in the tent. Once the bear is in the tent, it is very difficult to get it to leave.