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The initial head-scratching phase over the Amazon-Whole Foods deal is giving way to some aha moments as commentators absorb the idea of a mostly online retailer buying something as tangible and localized as an organic grocery chain.
They’re pointing out that Amazon will be acquiring a first-class logistics operation, a global distribution hub for its own grocery delivery business, and the opportunity to sell to a broader range of high-income customers.But much of the commentary so far has missed a crucial part of the story: It’s all about the data.
The Wall Street Journal was one of the few publications to emphasize this vital aspect of the proposed buyout. The Journal rightly points out that the deal would enable the new company to combine its online and in-store knowledge to better predict what goods to carry in-store and to offer cross-sell promotions to customers who shop at both venues.
All true. But there’s a deeper principle involved here. In general, a web company with high-quality data on its customers (Amazon, in this case) will have a much higher enterprise valuation than an equivalently sized “real economy” company with a less robust data set. For example, Walmart has four times the revenue but only half the valuation of Amazon.
The market correctly perceives a very high lifetime value for each Amazon customer because the company is so adept at using its data to lock in the buyer and target its marketing with tremendous precision.
That data leverage is the key to the lifetime-value-per-customer metric, which is what also…The post What Amazon taught us this week: Data-centric companies will devour competitors appeared first on FeedBox.