Amazon Snapping Up Whole Foods
Having just written a book on food trends among millennials, I feel obligated to discuss Amazon’s recent acquisition of Whole Foods, the pricey, health food market that was known for selling organic foods, specialty brands, and locally-produced items.
For me, a trip to Whole Foods has always been a rarity and a splurge. There is absolutely no way I could justify doing my grocery shopping entirely at Whole Foods, but the occasional visit is always fun. I love to walk up and down the aisles, taking note of new brands and seeking out any specialty items that are hard to find elsewhere. Whole Foods is where I’ll buy exotic yogurt flavors, chickpea-based raw cookie dough, or tortilla chips made from veggies, but still manage to leave with less than seven items in my bag.
When I heard about that Amazon was going to take over Whole Foods, I was curious. I wasn’t surprised; at this rate, I think my entire generation believes that Amazon might actually take over the world one day. The company seems relentless in its business pursuits — from delivery and transportation services to the healthcare industry to now the grocery industry. But although I wasn’t surprised, I was still both curious and skeptical. What was this massive, data-seeking, do-all company doing buying Whole Foods? How was Amazon going to change Whole Foods?
So far, it seems like the $13.5 billion deal hasn’t caused any dramatic upheaval. The major changes are the addition of a home delivery service, price cuts on grocery staples, the marketing and sales of Amazon tech gadgets in Whole Foods stores, and Amazon making more of Whole Food’s private label food times available online. A few changes, however, are causing some tension between Whole Foods and its vendors. Post-acquisition, Whole Foods now wants to control the food organization process from the backroom to the grocery store shelves.
Previously, independent brokers and vendors could come in and, depending on their personal relationships with Whole Foods employees, choose where to place their products and how to organize them on the shelves. Now, Whole Foods wants to manage that entire process, and in order to do so, they are charging their venders service fees. In a similar vein, Whole Foods is restricting the number of samples allowed as well as the number of local items they offer. Whereas they used to have employees known as “foragers” who would spend time searching their own neighborhood farmers’ markets for local artisans who could potentially sell their product at Whole Foods, they now plan to discontinue the local sourcing program. Brands will no longer be able to just pitch their ideas without demonstration of a long-term marketing and financing plan.
These changes are causing unrest among both consumers and vendors. Vendors who used to have personal relationships with Whole Foods are losing their agency, and many lack leverage because they rely on Whole Foods as one of their biggest customers. Additionally, consumers appreciated having the duality of both grocery staples and unique, local offerings that Whole Foods used to provide. Even though Whole Foods may be offering lower prices, it might not be enough to offset their decrease in variety of products and sources.
Finally, as confident as we may be in Amazon’s ability to capture any market they set their mind to, some of the early road bumps they have experienced throughout their acquisition of Whole Foods indicate areas that require improvement. In months directly after the deal, Whole Foods received numerous complaints and criticism for its lack of inventory. Apparently, customers had been walking into their local Whole Foods only to find empty shelves. The problem is that even though Amazon may be a logistical genius with online sales, it has far less experience with traditional retail, which requires a delicate balance of inventory. The more inventory Amazon acquires, the more cash flow it needs. If Amazon went in trying to cut corners too quickly, it may have resulted in a shortage of inventory on grocery store shelves. They are used to dealing with products in warehouses where you only ever need just as much as you’re going to sell. Grocery stores are a whole new ball game; customers simply won’t buy a product if it’s one of the last products left on the shelf. In an article for Eater magazine, Daniel Galarza writes, “It sounds like Amazon was trying to cut the fat, and simply cut too much too quickly.”
My take overall? If Amazon can find a way to provide healthier, whole foods to consumers at a lower price without compromising the integrity of Whole Foods, I am all for it. But when it comes to their motive to centralize operations so that they can gather consumer data on our shopping habits in order to take over the grocery shopping industry? Or when it comes to their willingness to cut out local brands from their business for the sake of their own bottom line? That’s when I get angry. Once again, it falls to the individual consumer to look out for him or herself.
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