Let’s Discuss: Has Amazon Made Whole Foods Better?
By Aisha K. Staggers on March 15, 2019
In 2017, I wrote an article on Amazon’s acquisition of the Whole Foods Market, a popular organic food store chain. Initially, it was a promising prospect: healthy eating would be 43 percent cheaper than under the store’s previous ownership. Add to that the convenience of Amazon’s delivery meant that consumers would have more options in terms of how to access the store’s offerings, especially in rural areas where the closest Whole Foods Market could be 100 miles or more away and local fresh food offerings didn’t have as much variety for healthy eaters. Now after two years, it’s time to reevaluate and reassess my original opinion. Has Amazon made Whole Foods better? Or, have the quality and availability of products changed to meet Amazon’s mass-market model that is efficient for books, electronics and other items that don’t necessarily hold when it comes to the delivery of fresh foods?
Amazon purchased Whole Foods Markets in 2017 for just over $13 billion. Prior to that the chain, founded in Austin, Texas, was owned by John Mackey and Renee Lawson Hardy, owners of Safer Way Natural Foods, and Craig Weller and Mark Skiles, owners of Clarksville Natural Grocery, according to the store’s own history page. The first store opened in 1980 and over the years, the original owners went on to acquire other stores as part of their chain and expanding across the U.S. and internationally. In the two years prior, the chain had seen a four percent decline in revenues. Add to it pressure from some activist partners for the company to grow technologically to meet a changing world different from the hippie movement that created it, Whole Foods founders and partners were ready for a change.
According to , neither the store’s history nor popularity are proper justification for spending upwards of $13 billion for a chain of grocery stores, no matter how exclusive. But, there may be another reason.
For Amazon to maintain its high stock price, it has to grow its revenues through online sales, after all that’s its primary business. The company has to constantly expand its product offerings in order to keep revenues high. Being a large company with few competitors, Amazon has to grow its revenues. For that, it has to keep finding new products to sell to consumers and continue to grow the number of people who purchase products they offer.
According to the Forbes article, Amazon could venture into selling “health, banking/finance, cars, grocery and maybe some others depending on how daring Amazon wants to be.” Of all these, the company chose grocery because it “is closest to what Amazon knows best,” as it “involves selling and delivering consumer products.” Online food sales have enormous potential, but there are a few things that hinder this potential: meat, seafood, and fresh produce.
People are very particular about their fresh food items and aren’t very trusting of others to select these items for them. This would be the reality for online grocery shopping. The only remedy for this appears to be technological innovation so consumers can see these products from a remote location and guide personal shoppers on which items to select. At this time, Amazon is just not there- this is not to say they aren’t working on developing this technology. They may very well be. Just at this time, they aren’t there and must rely on in-store purchases.
And so must we, if we are to see how Whole Foods Markets have either improved or declined since becoming an Amazon company.
One of the first things Amazon CEO did upon acquiring the Whole Foods Markets was to change how the stores looked. Amazon has also begun sell its own in Whole Foods stores. For example, shoppers can buy devices like Echo in stores.
Shoppers will also see signs for special discounts specific to Amazon Prime members. This serves a dual purpose: 1) consumers will be motivated to purchase the annual membership that is about $100 per year charged annuay; and 2) Prime membership also makes Amazon a more attractive option for online shopping apart from grocery items as custimers can get free 2-day shipping on most products. At the moment, these in-store discounts are local or regional, as stores vary in their offerings depending on the consumer base they serve. Amazon expects to change this to a national discount program.
Something else that may look different is how many employees work in the stores. According to CNBC, Whole Foods could reduce its workforce as the company moves to centralizing its merchandising, particularly with canned and shelf-stable goods that are only available through o line ordering directly from Amazon’s warehouses.
Eventually, those discounts will be national. Whole Foods has also begun to offer free delivery for Prime members.
As Amazon continues to centralize its merchandising (more on that later), there may be fewer employees in its stores.
Consumer Costs and Market Revenues
While prices have dipped about 43 percent, the cost of Whole Foods is still 13 percent above its cheaper competitors and this has done little to revamp its “Whole Foods equals Whole Paycheck” image. Amazon expecta this to change as they move to streamline distribution.
As consumers await deeper discounts at the brick and mortar stores, the Whole Foods brand has seen revenue increases since being taken over by Amazon. Reports show that Whole Foods has seen three percent revenue increases each quarter since being taken over in 2017.
Product Quality and Customer Satisfaction
While the corporate numbers seem to be on the uptick following the transfer of ownership to Amazon, customer satisfaction has not been so kind.
One of the main changes that consumers are seeing is the general shift from buying produce and other products locally and from small suppliers to national brands. Where before you couldn’t find products with artificial sweeteners or brands like Coca-Cola and General Mills, Amazon has allowed these products to be infused into the Whole Foods stores and loyal shoppers fear more of this will come as the chain seeks to offer deeper discounts and cheaper products.
Food quality at Whole Foods has also suffered a gut punch since shifting hands. Early on, customers complained of empty shelves and produce that wasn’t up.to standard considering the cost they were being asked to pay. Some customers have complained that the organic produce offered at their local grocer was of better quality and price than what they found (or didn’t) at Whole Foods. Also disappointing tried and true Whole Foods loyalists were the prepared foods bars. As a fan myself, I can say my last trip to the Whole Foods hot bar was a disappointing one and I left empty handed. Even the salad bar wasn’t to snuff. Thankfully, the bakery items haven’t changed much, but the prepared foods that are gluten, nut, citrus and shellfish free that meet my dietary requirements as well have been lacking and on one occasion, something I had been familiar with for years and was a safe choice given my food allergies is no longer safe for me to eat.
These are the changes and problems Amazon’s Whole Foods Markets have experienced in the last two years. What the future holds is uncertain. Articles like this could prove useful to Amazon as it attempts to meet consumer demands and remain true to the process and technology Amazon is known for. However, if their focus is to only use Whole Foods to build up Amazon’s empire as opposed to Amazon build up Whole Foods, the company may find themselves becoming the Walmart of the organic foods market instead of a standout.
About the Author: Aisha K. Staggers is a writer, lecturer, and co-host and producer of “All Our Own” radio show and podcast and co-host of “Staggers State of Things” on the Dr. Vibe Show. Her work has been featured on MTV News, HuffPost, Blavity, Atlanta Blackstar, For Harriet, New York Review of Books and a host of other first-run publications and syndicated outlets. Find her on Twitter @AishaStaggers. For more of her work, check out her page here!
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Originally published at https://considertheconsumer.com on March 15, 2019.