Wouldn’t your life be easier if the kitchen cabinets and the fridge magically replenished themselves? That’s the thrust behind Amazon’s move into grocery home delivery. Take it from me, the financing runway will have to be pretty long for Amazon to be successful in this business. Grocery home delivery is where I cut my teeth in the investment world.
I remember learning that difficult lesson about Internet investing after spending the summer of my junior year at Babson as an intern for a grocery home delivery startup company. When the job was done, I liked the idea so much that I invested my own money in the company. A few years later I was sitting in Dick Young’s home in Newport telling him about the investment I had made. He thought it was great what the founder of the company was doing and if anyone could do it, this guy could. But I also remember that Dick wasn’t real excited about the business. His feeling was that good ideas aren’t necessarily good businesses/investments-a lesson I ended up learning the hard way. The company unfortunately went the way of Pets.com, Webvan, and Living.com.
It’s possible that Amazon’s CEO, Jeff Bezos, has a long enough runway to make home grocery delivery as easy as his Amazon Prime service. But at what cost? It’s important, especially as an investor, to understand the relationship between good ideas, good businesses, and good investments. Now that Amazon’s management owns this idea/business and the company isn’t simply invested in it, will they have the ability to separate themselves if it turns out that the gold rush in grocery delivery is simply that—a gold rush to nowhere? It could be tough for Bezos & Co. to throw in the towel.
There’s a lot to learn from watching Mr. Bezos. If you have the time, listen to the entire interview below and share it with your children or grandchildren. We’re back on the ground floor of something. Is it something special? I’m not quite sure yet. And if you are short on time, which Bezos knows you are, then listen for a few minutes beginning at 13:00 about where we’ve been, and the road ahead for Amazon.
