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Learned of Amazon's deal from CNBC
The Whole Foods contract
In 2014, Whole Foods was set to sign with either Google Shopping Express or Amazon, Instacart's two big competitors. Nilam Ganenthiran and Instacart's founder, Apoorva, did all kinds of shenanigans to get in front of the right people and made a godfather offer that lost about $15 on every Whole Foods bag delivered.
It took a year and a half to build enough volume to renegotiate, and by year two the contract had gone from red to green. Then Ganenthiran and Apoorva flew home from an Arkansas meeting with another retailer that hadn't signed, and each found a group text from Whole Foods' CEO and CIO asking to talk first thing the next morning. They both guessed it was a service-level complaint.
The morning of the news
The next morning, coffee in hand, he saw the headline crawl on CNBC. The Whole Foods leaders were gracious on the call and promised everything would be okay, while he texted Apoorva asking how, since their worst competitor was acquiring their biggest business. Texts from investors, employees, and friends arrived within minutes, and his gut told him it would be great anyway.
Instacart had just fought its way to profitability. An all-hands was called, and he flew to San Francisco and spoke to the company with no preparation. His first words were that this was the moment they had all been waiting for. Later he traced the line to Phil Knight's biography, Shoe Dog, where Knight tells his troops the same thing after Onitsuka cut off his distribution, and he had thought the line was his own.
Why did the Whole Foods deal worry rivals?
Amazon announced in June 2017 that it would buy Whole Foods for about $13.7 billion. The purchase gave an online retailer with a huge logistics network more than 400 physical grocery stores at once. Grocery is a low-margin, high-frequency business, so a rival with deep pockets and fast delivery could change how shoppers buy food. Shares of several large grocery chains fell on the day of the announcement.
Why would a delivery offer lose money per bag?
Each order needs a shopper to pick the items, a driver to carry them, and often a delivery fee that has been discounted to win the client. Costs per order fall as volume rises, because shoppers can batch several orders in one area and drivers travel shorter distances between stops. Early on, there are too few orders in each neighborhood for that to happen. Delivery businesses call this route density, and it is among the biggest drivers of cost per order.
How did losing a supplier create Nike?
Blue Ribbon Sports began in 1964 as the American distributor for Onitsuka Tiger shoes, and Phil Knight tells the story in his 2016 memoir Shoe Dog. Around 1971, when the Japanese maker moved to end the arrangement, the company turned to making its own shoes. It adopted the name Nike, suggested by early employee Jeff Johnson, that same year. The company formally renamed itself Nike, Inc. in 1978.
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