Whole Foods is owned by Amazon, so it shouldn't have any business difficulties at all, right?
Well, maybe not. What's causing this health-focused supermarket chain to falter? Keep watching
to find out.
While there are no immediate signs that your local Whole Foods Market may be closing, the
company is facing some obstacles going into the new year. Whole Foods can trace its roots
back to 1978 when it started in Austin, Texas, as a single store called "SaferWay." As the
idea of healthier eating became increasingly mainstream, the grocery chain grew, and today
there are more than 500 of the upscale, organic, and natural foods-focused stores in North
America and the U.K., the company's website notes.
In 2017, Amazon acquired Whole Foods. Slate reports that the purchase led to an influx
of investment in grocery delivery as competitors strived to match Whole Foods' service. However,
as mainstream grocery giants such as Kroger used their buying power to compete, Whole
Foods lagged, GlobalData Managing Director Neil Saunders told MarketWatch. Even though
the pandemic gave Whole Foods home delivery a boost, the brand's brick-and-mortar stores
have seen a considerable downturn, with first-quarter sales falling by 16% in 2021 versus those
in the prior year.
Another problem facing Whole Foods is the chain's lack of an independent online presence.
Unlike its competitors, Whole Foods customers must have Amazon Prime to have access to its
online ordering, pickup and delivery services. Although more than 142 million people in the
U.S. have Prime subscriptions according to 99 Firms, that still leaves a whole lot of
people without the ability to buy from Whole Foods online.
Compounding the problem is that those who take advantage of online shopping at Whole
Foods could make the in-store experience more difficult for others. Prime shoppers, whose
job it is to fulfill online orders, make for crowded stores and longer lines, according
to RetailWire. An analyst the news outlet spoke to called shopping in some Whole Foods
stores "a nightmare" because of all the order-pickers.
Another challenge facing the company, according to RetailWire, is that, given its huge parent
company, the brand has lost much of its reputation for buying and selling local products. At
one time, that attribute made the chain very appealing to its customers. But in recent
years, the company has shifted to a more centralized purchasing model, more like the mainstream
supermarket chains do it. This has left less shelf space for locally grown or produced
products. The grocer has taken steps over the last year to recommit to selling local
products, but its reputation for offering foods from customers' home regions has taken
a hit.
Finally, Whole Foods has long dealt with a reputation for high prices. As organic foods
become more mainstream, with organic products populating shelves even at discount grocers
such as Aldi, Whole Foods will lose some of its customer base, RetailWire theorizes. The
value equation is simply not on the side of Whole Foods, GlobalData Managing Director
Neil Saunders told the outlet. And its customer-service reputation doesn't help. Saunders said,
“Customer service is often better at Target and Walmart than at Whole Foods, where too
many staffers are surly, which undermines justification for premium pricing.”
According to The Philadelphia Inquirer, Whole Foods has been struggling to keep up with
other businesses. Amazon's business model promotes staying home and having items delivered,
often at slightly reduced prices.
Despite being owned by Amazon, Whole Foods' way of doing business may not be conducive
to the new normal of customers buying groceries online more often and heading to the grocery
store less. An October 2020 GroceryDive report found that Whole Foods' in-store traffic hadn't
recovered during the pandemic, even as foot traffic has increased at competitors such
as Trader Joe's. Amazon's Amazon Fresh, which has a model seemingly better suited for the
pandemic era, is also still going strong.
Grocery industry consultant Bill Bishop told The Philadelphia Inquirer that Amazon's purchase
of Whole Foods may have been a "strategic error" for the company. Another industry expert,
Michael Maloof from Earnest Research, told the outlet:
"Everyone is buying more everywhere, but total customers are actually down for Whole Foods.
Whole Foods is in a uniquely horrible place."
Whole Foods, meanwhile, responded to the Inquirer in a statement,
"Whole Foods Market continues to grow, and we strongly dispute this portrayal of the
health of our business. In addition to offering a safe in-store shopping experience, we're
proud we've been able to rapidly expand grocery delivery and pickup to meet the needs of customers."
Amazon has deep pockets, of course, and could keep Whole Foods afloat for quite a while
to come. But if the parent company loses faith in its supermarket subsidiary, things could
get pretty bad pretty quickly.
Check out one of our newest videos right here! Plus, even more Mashed videos about supermarket
chains are coming soon. Subscribe to our YouTube channel and hit the bell so you don't miss
a single one.