Amazon seems to be getting blamed for a lot of the issues that are confronting Whole Foods, and the Wall Street Journal report that about a dozen executives, including leaders of the bakery, produce, sustainability and local foods divisions, have left the company is the latest salvo.
Many of the complaints coming out of Whole Foods these days seem to relate to initiatives that were put into place before Amazon took over the chain, including the “order-to-shelf” inventory management system that launched months before Amazon’s takeover and left some shelves bare at Whole Foods.
The most recent news came out of a meeting in Austin just yesterday between Whole Foods and about 200 of its largest suppliers to discuss old and new initiatives designed to help them both increase sales. Among the most controversial is not allowing food brokers to arrange products on store shelves, and instead requiring them to pay Whole Foods a fee to do that itself.
Food brokers are paid a commission on sales and typically perform that function. The new program will most likely see the transfer of the brokerage fee from food broker to Whole Foods and should not have an effect on either the brands’ bottom line or prices for the consumer. The loser? The food brokers.
The changes taking place at Whole Foods are making the company a better retailer. Amazon’s focus on consumer data will make the retailer a powerhouse that will effectively compete with all food retailers, and be able to serve a wider customer base – not just those die-hard Whole Foods shoppers who want the most curated, local and healthy offerings. The Amazon Prime MasterCard that offers its users a 5% discount on all purchases made at Whole Foods is just one example.
The culture that John Mackey and the other co-founders of Whole Foods started back in 1980 was on target for those days. Their competition in 1980 was the smallish, local health foods store that had a bare-bones assortment. The food world and what shoppers want these days are different – and Whole Foods found itself surrounded by other grocers, from Walmart and Kroger to Hy-Vee to Sprouts, that offered the same or similar better-for-you offerings at lower prices. Whole Foods didn’t have the chance to evolve culturally as Wall Street pushed it to open store after store and it struggled to keep up the pace.
I am sure there are some very loyal Whole Foods executives who find themselves bewildered by Amazon’s speed and culture, and no doubt they will have disagreements with the new direction. And those people should leave the company, with our thanks for their years of hard work bringing new foods and beverages to store shelves that perhaps might never have become successful otherwise.
Amazon’s grocery lens is different than that of a traditional grocer. I’m sure the questions and insights that are being discussed might ruffle those who have been in grocery their entire careers. That’s a good thing. The grocery industry has been woken up by the likes of Amazon and Instacart, as it was decades earlier when Walmart made its move into grocery and became the country’s largest food retailer.
Grocery right now is where “the cool guys” are headed as we witness more Silicon Valley-type startups in food retail, cellular agriculture, food production, farming and blockchain. The traditional path of a bagger becoming the CEO of a food retailer is long gone, and it is time to reimagine what a food store is.
Who says we have to have a store where we enter and find ourselves in the produce or prepared foods area – and then have to walk up and down aisle after aisle as we search for our foods? Why not build stores that are designed with the shopper’s needs in mind?
How about setting up a store that is designed for the way we eat? Breakfast, lunch, snack and dinnertime: where all the possible foods and beverage for each of those meal occasions are displayed and the shopping trip is more focused and enjoyable.
It’s that kind of lens, which the industry has long needed, that Amazon brings to the industry.
By Phil Lempert
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