Amazon.com is looking to expand its Whole Foods Market (WFM) brick-and-mortar retail network with bigger stores to bolster the online shopping business just seven months after it acquired Whole Foods in late August 2017 for US$13.7 billion. And WFM regional marketing staff layoffs have raised fears over its impact on local and 'upstart' brands.
The moves come as US competition fears grow for Amazon's impact on smaller grocers and supermarkets that could also impact giant membership retailer Costco. Analysts said that President Trump is looking at more strictly regulating Amazon, while the President suggested the U.S. Postal Service is underpriced for Amazon's delivery model.
Amazon launched free two-hour delivery of natural and organic products from its Whole Foods stores through its Prime Now delivery service in Atlanta, then in greater Los Angeles and Orange County.
Walmart responded to Amazon's grocery e-commerce expansion, teaming up with San Francisco-based on-demand delivery provider Postmates, beginning April 10 in Charlotte, N.C. Walmart is expanding to 100 cities in the coming months and working to bring the option to more than 40 percent of households nationwide.
Whole Foods stores have averaged 40,000 square feet up to 2017 (or 3,700 square meters), while the chain operates 480 stores, including 14 in Canada and seven in the UK.
Bloomberg News said that the world’s largest online retailer is searching for bigger Whole Foods locations in cities that can serve as both grocery stores and urban distribution centers for delivering goods to online shoppers more quickly, according to a person briefed on the plans.
"Amazon is seeking more retail space that can accommodate grocery aisles and storage for the most popular items purchased from Amazon’s website, like consumer electronics, bestselling books, and yoga pants," Bloomberg said.
Whole Foods is also working with Regency Centers Corp., one of its largest landlords. John Nahas, vice president of investments for Regency Centers, confirmed that Whole Foods representatives have asked for larger retail spaces and parking stall installations in areas with high concentrations of Amazon Prime subscribers. Regency Centers owns and oversees 28 Whole Foods properties across the US.
“We continue to see signs of Amazon’s further integration with Whole Foods,” Mr. Nahas said.
"Amazon wants more spaces to store goods close to customers to complement its huge warehouses on the outskirts of big cities. The urban spaces are needed to expand the selection offered through the two-hour Prime Now delivery service, which currently carries a limited inventory comparable with what’s found in convenience stores or drug stores," Bloomberg said.
And the pre-Amazon Whole Foods Market strategy of tailoring marketing and product offers to local communities was reported to have been dumped in late March, after WFM confirmed it will lay off its regional marketing staff at the Texas-based grocery chain’s stores and regional offices, according to the Seattle Times.
In late March, WFM hosted a summit for up to 200 of its suppliers at its Austin, Texas base amid industry concern about how its ongoing business revamp will play out under new owner Amazon.com.
"As part of a restructuring effort underway before the acquisition, Whole Foods earlier this year began requiring suppliers to use a firm of its choosing to restock shelves and run promotions. As reported in the Washington Post, it is charging some suppliers the equivalent of three to five percent of sales to cover the cost of those services," Reuters said.
WFM also adopted a Costco Wholesale Corp styled model for in-store sampling and has added charges for that service, to the chagrin of some small, local brands that were a draw for some shoppers.
Those changes have caused significant heartburn for upstart brands and shoppers who were drawn to Whole Foods because it offered a unique mix of products, Reuters added.
“The changes we’ve been making across the company directly address the feedback our supplier partners have shared over the years about the challenges of our decentralized purchasing structure and inconsistent practices across regions and stores,” Whole Foods spokeswoman Robin Rehfield Kelly said in a statement.
Whole Foods will also shut down its rewards program, digital coupons, and customers’ online accounts on May 2nd and fold everything into Amazon Prime, according to an email to customers this week. Unused rewards will not roll over to Amazon Prime, so customers will need to use their benefits before the program officially ends.