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Amazon Said to Plan Cuts to Shed Whole Foods' Pricey Image (bloomberg.com)
64 points by arcanus 120 days ago | hide | past | web | 76 comments | favorite



Hmmn. The entire story is attributed to "a person with knowledge of the company’s grocery plans." We aren't told whether this is a senior Amazon executive or an automation-services vendor who sat in on a couple meetings with a mid-level Amazon team and thinks he/she has the whole story.

Everything in the piece sounds like one path that Amazon could take. But Amazon also has a long history of exploring a lot of ideas before deciding where it will commit big resources. Hearing the same scenario from multiple sources would have been helpful.


This is pretty common as a PR move actually. Any backlash on stock price or public opinion and they get to rejigger the strategy for free and call the claims "unfounded".


You need to know that "person with knowledge..." is code for "Jeff Bezos".


At Steve Jobs once put it: "It's a strange ship that leaks from the top"


Ah, that would be a "person with extensive knowledge."


"Amazon expects to reduce headcount and change inventory to lower prices and make Whole Foods competitive with Wal-Mart Stores Inc. and other big-box retailers."

That's a huge change. You go into Whole Foods, and it's mostly good-looking, thin people, not the wide loads and screaming kids of Wal-Mart. If Amazon wasn't looking to go upscale and high-margin, what did they buy Whole Foods for?


I suspect they'll turn it into Trader Joe's with delivery, not Wal-Mart.

Lower prices, lack of brand names. Think AmazonBasics, but for food. I wouldn't buy anything important off AmazonBasics, but for cables, shower speakers, and other minor things it's Good Enough.

If you had to choose between perfect, high quality produce and staples you drive to a physical store for, or decent (but not perfect) produce you can have delivered at the same (or lower) cost, which would you pick?


Agree, turning it into a Wal-Mart like store wastes the Whole foods brand name. The current customer base would move to other stores. Best to keep their customer base and lower costs. Trader Joe's is a great example.

They're going to automate as much as possible with the goal of reducing costs, use the stores as a base for the Amazon Fresh delivery business, expand prime fresh and reduce product selection at the stores. I suspect the stores will become a base for Blue Apron like ready to make food deliveries.


> If you had to choose between perfect, high quality produce and staples you drive to a physical store for, or decent (but not perfect) produce you can have delivered at the same (or lower) cost, which would you pick?

There are tons of grocery delivery services around where I live, none of which I use. We still go to the Whole Foods because we like to wander around tasting the free samples, being able to pick the produce items we want, maybe having lunch at the prepared food section, etc. That's a big part of the appeal.


> I wouldn't buy anything important off AmazonBasics, but for cables, shower speakers, and other minor things it's Good Enough.

I assumed the same, then actually bought something off Amazon basics. I can't speak for everything, but man was it low quality. It's like they were aiming for just barely above the bar. Simple things like sheets and blankets. So cheaply made.


That wouldn't surprise me, last I looked Whole Foods had a substantial amount of their house brand (365) in inventory. Amazon can just tap into the existing pipeline and rebrand if needed.


in Belgium Delhaize also has a 365-brand


They have been dipping their toes into house-brand food goods in the past few years with their Happy Belly brand of stuff. I've generally been happy with it.


It does make sense because that is Amazon's modus operandi. They are the Walmart of online shopping; one place for everything and it's cheap too. They don't really associate themselves with quality or try to win over those brands, in fact luxury brands have fled from Amazon for a while now.

(See: https://qz.com/807419/is-it-even-possible-to-sell-luxury-on-..., among other articles that you can find from googling.)

But I agree that it's very strange that Amazon is buying Whole Foods, which is a luxury grocery store, to then try to replicate Walmart. This will just alienate the customer base and drive them to Traders Joes, Coops, etc.


They don't really care about the customer base. They figure their own customer base is bigger than anybody else's already. They wanted an in on the grocery retail business, and WF was a way in.

I guess we will have to just wait and see what happens. Normally when one company buys another, they say "nothing will change," which means that in six months all trace of the thing will be gone.

Personally, I'm not looking forward to the change. One of the things I like about WF is that they're pretty good about stocking products from local/regional producers. And they have a pretty good cheese section. I'm betting Amazon will not care about these things.


> They are the Walmart of online shopping;

What are you basing this on? Amazon (Prime) customers are way more wealthier than Walmart customers:

https://fortunedotcom.files.wordpress.com/2015/12/screen-sho...


hostile relationships with suppliers; poor treatment of employees; shoddy store conditions - the UI is utterly wretched!


>"the UI is utterly wretched"

Aesthetically perhaps, but it seems very well designed in terms of making purchasing painless, which is part of the reason Amazon do so well.

I do try to avoid buying things on Amazon now though, they've gotten too big, it's a little scary how much influence they have on online retail.


You can purchase ever so easily, determining the what you are purchasing is not. The product descriptions and specs have been lacking since inception.


But the reviews remain highly reliable in many cases. Fakespot and other services have popped up to address the gaming aspect of reviews.


I don't know what you go to Whole Foods for but I go there for the food, and if the same food is cheaper then why not.

For my good looking thin people needs I go look into the mirror


The question is whether it's possible to make it cheaper without compromising quality noticeably. You cannot ship fresh heirloom tomatoes from China on a huge slow boat.


You can fly them in if you're building your own air freight network.


"Change inventory": it's not the same food.


> change inventory to lower prices

This strongly suggests it won't be the same food.


Love this.


Why? It was a haughty comment that didn't address the substance of the original comment: Whole Foods customers are in better shape (hence expect and demand healthier food) and are more polite.

I agree with the former, but not the latter.


Because I thought it was funny. Sometimes, it's okay to get your jollies on.


>Whole Foods customers are in better shape

Citation needed.

>(hence expect and demand healthier food

...and so they pay for the placebo instead?


Now when I go to Whole Foods, I'll have to worry about counterfeit food.

(Just kidding. There are no Whole Foods in my region.)


> If Amazon wasn't looking to go upscale and high-margin, what did they buy Whole Foods for?

I completely agree that such a strategy throws away much of the value of the Whole Foods brand.

It doesn't surprise me that Amazon is taking it in this direction though. What Amazon is best at is ruthless price differentiation and/or logistics. They don't do price discrimination in their cash cow businesses as far as I know: online retail, streaming (comes packaged with prime for "free), aws, kindle, etc. Their brand is providing the best value and convenience for purchasing commodity retail items. Even their branded items compete on price.

It's interesting that Whole Foods already started down the path towards competing on price before Amazon swooped in.


Personally, I suspect it is because Amazon's most loyal online shopping demographic also has a very favorable opinion of Whole Foods. That and a confluence of business circumstances.


Probably because Whole Foods was struggling, so it was easier to buy them and take them downmarket to compete with Trader Joe's, rather than buying Trader Joe's.


Since Trader Joe's is owned by the family that owns Aldi, it's unlikely Amazon would be able to buy them out cheap.


> If Amazon wasn't looking to go upscale and high-margin, what did they buy Whole Foods for?

I suspect they wanted an in on retail grocery, and WF was on the market at a price that was worthwhile for the number and distribution of locations they have.


Brand name? I'm no marketing expert but maybe they want to trade on the name in the same way Cadillac has gone further and further down market but is still marketed as a luxury brand that can compete with European luxury cars


I'd say that Cadillac is doing better at not going too far down market. In the 80s they badge engineered a Cavalier.

https://en.m.wikipedia.org/wiki/Cadillac_Cimarron


I would hazard that this is also serious news for small, local brands that are trying to establish themselves, since Wholefoods has been the best spot for them to start scaling out to.


Because it was cheaper?


Animats asks "what did they buy Whole Foods for?"

- Locations: WF is located where the well-off go,

- Warehouses: good for use after WF employees quit, and

- Real estate: sell unusable locations off.

If Amazon can convince customers to pick up packages they may win a bit; but that works only in densely-populated parts of larger cities.

Whole Foods was a grocery chain; Walmart is a retailer. But Walmart can't compete in the grocery business (they've been trying awhile and never gained traction).

Whole Foods cannot become a retailer like Walmart w/o starting from scratch (except for the real estate, buildings and a bunch of cash registers, refrigerators, meat bins, butcher shops, beer distilleries, escalators, etc).

So this move, in the end, is a liquidation sale. It came about b/c Whole Foods simply couldn't gain sufficient grocery market share. All Amazon will get out of this acquisition is the real estate and the buildings.

If Bezos was _really_ smart, he would have let Walmart buy up Whole Foods and then watched as the Whole Foods golden goose weighed Walmart down and drained its money. Believe me, WF is a commercial "tar baby". A better metaphor is the grocery market as a "tar pit", now with both Amazon/WF and Walmart trying to stay above the surface while all the other grocers have been living there happily for centuries.

Amazon need to be broken up by the Justice Department. Their "creative destruction" is more "destruction" than "creative" in this instance.


Why do say Walmart can't compete in the grocery business? It seems to me that they've been selling groceries quite successfully for many years.

Also, I don't believe Whole Foods owns the land its stores occupy, it's all leased.


dkrich: "Also, I don't believe Whole Foods owns the land its stores occupy, it's all leased."

If true, one more reason Amazon fu'ed.


> Walmart can't compete in the grocery business (they've been trying awhile and never gained traction).

Walmart already has the larges market share in food and beverage business.

https://www.statista.com/statistics/240481/food-market-share...


Your statistica link is misleading.

https://www.thebalance.com/largest-us-based-grocery-chains-3...

The main problem is that Walmart is not and never was a grocer - it is a retail store that subsidizes its grocery with its retail success. Nor is Amazon a grocer. Buying Whole foods will not make Amazon a successful grocer. My s/o asked "But Whole Foods will turn over all their knowledge to Amazon with the takeover, of course?" to which I replied "Once Mackey leaves, Amazon officers will be given a 4-inch binder by departing Whole Foods staff with 700 white blank pages and a top page that says in big letters "F* You!".

Grocers have existed for 100s of years in a very competitive market. Despite all the bravado and technology, neither Walmart nor Amazon know what a quagmire they are getting into by wading into that tar pit.

Whole Foods is a poison pill that marks the beginning of the end for Amazon's growth.


WalMart is very competitive in grocery, it's a national leader with sales far above Whole Foods.


Why would you buy Whole Foods to compete with Walmart? Seems like totally different branding and target markets...


Because you just wanted to pick up a bricks and mortar chain to populate with your own stores.


Seems like there's other brands that you could acquire if that was the goal (Safeway, Ingles, Publix, Kroger, etc), but maybe those are too big? Anyways, just seems like a waste to trash the Whole Foods brand when I imagine that's a pretty solid chunk of their value.


Is it necessarily a waste, or perhaps a gamble of appealing to different type of consumer?

What if Whole Food's brand cachet means as much, or more, to people who can't afford to shop there? In some circles 'Whole Foods shopper' is a denigration, drenched in jealousy. There may be a demographic that perceive Whole Food brand aspirationally, who will be brought in by reducing quality and prices.


Does Ingles have any locations outside the southeast? I'm surprised to see it mentioned here.


That's a good question actually. I was just thinking of nearby grocery stores off the top of my head.


Personally, I prefer Trader Joe's to WF. TJ by design stocks FEWER SKUs, has human (humane) cashiers that can engage you in conversation and know how to properly bag items. It's the closest thing to European street stands, excluding of course the American farmer's market which can be so much more expensive.


Every time I get some vegetables at Whole Foods, some cashier will look at an item confused and ask "What's this?". Um...Celery...

This has never happened to me at Trader Joe's.


Well, here's 37 lbs of free advice, Bezos & Co: Change the name to "Half Paycheck" to at least be self-aware enough to know why the customers have left for Central Market, Trader Joe's, and Sprouts. Whole Foods became a parody of itself. Sure, it took about 10 years, but who are you kidding - the CEO and Board just sold out to Amazon. I wonder if beard care products will still be provided for free to employees in all stores...


The beard care thing tipped me off. The WORST bath salt I've ever gotten came from Whole Foods. It was this $25 thing that was super small and smelled weird.

The best salt? $5 Dr Teals from Walmart: the land of "wide loads and screaming kids."


Not a regular Whole Foods customer, and this is off the cuff, but my distinct impression with regard to how this will impact Whole Foods' "line" (i.e "normal") workers, is: Welcome to your McJob.

When I do go into Whole Foods, the staff are always attentive and seem to be in relatively good moods and well treated. I am sorry for the negative impact I expect this will have on them.

I don't have a Whole Foods close to me. And, while some items there can be oddly cheaper, and they further offer a "case" discount that is quite significant [1], it can indeed be "whole paycheck" for other items and if you're not comparison shopping.

Which, for me, mostly means comparing with my local instance of a regional supermarket chain. Not as upscale as Whole Foods, but plenty ok, and a union shop, where the employees seem to be treated all right. (I know a few of them. I've heard at least one story about how the union had the back of a worker I know to be one of their better ones, when some new management douche tried to screw him over.)

Amazon... Well, my overall impression of Amazon, is that it's a meat grinder, unless you are one of its "blessed" employees.

We'll see whether they can manage to run contrary to that, in absorbing Whole Foods.

1) While a friend was in hospice, all she could eat reliably was yogurt, and she particularly liked one line that the facility she was in didn't carry. I stopped by Whole Foods and grabbed a bunch, of a variety of flavors -- whatever looked promising. At checkout, the cashier looked at it and gave me the case discount, without my asking. What should have been a $30+ total turned into... was it $10, or $15? I had to ask them to repeat the total, as it was nowhere near my mental math approximation.

Separately, I like Amy's chili. For a long time, Whole Foods was the cheapest place for it -- even without the case discount. Sometimes, on the order of a dollar a can cheaper.

On the other hand, some of their produce prices were double or more those of my local supermarket. Before getting into the whole "organic" question.


I would love to see some more local Amazon presence, considering how much use I get out of Amazon. But the Venn diagram of things I get from Amazon and things they stock at Whole Foods does not intersect.

I would like to see some local Amazon presence, but coming into Whole Foods and trying to make it competitive with WalMart seems like a huge mistake. I mean, look at how well WalMart's attempts to move into Amazon's online space have gone...


Isn't that like buying Marks and Spencer's or Waitrose and saying we are going to make it like Aldi or Liddle.

If that's Amazons view time to short amazon


It might be a PR stunt to provoke exactly that :) If Amazon is not going to do anything crazy with Whole Foods, it's time to long more Amazon.


It might be just be the right move for the times. Increasingly, Whole Foods has been coming across as pretentious.

The last time I went in one I was confronted by an entire freezer case of renaissance mermaids basking in flowers on pizza boxes, each signaling virtue for some ecological or pseudo-science health idea.


Lidl


Sounds like what happens when Oracle buys tech companies.


Doesn't Oracle usually raise prices?


I'm sure he was more referring to the complete destruction of everything that was cool about Sun Microsystems when Oracle gobbled them up.


I'd like that to mean they will keep the same kind of inventory -quality of their stock as well as their commitment to sustainability and ethics while bringing down prices via partnerships and economies of scale rather than by sourcing "cheaper goods" a la Wal*Mart which achieved that goal by sourcing unethically from overseas and dropping local producers.

If there is change in quality of product (and I don't mean their new age medicine stuff) I'll buy elsewhere.

The other day people were concerned WalMart might bring down Bonobos to their level --I'm concerned that Amazon might bring Whole Foods down to their level instead.


Aaaaand they ruined it.


Starting to downvote all bloomberg articles because their ads stop my music on mobile when i try to read their articles. Not a new behavior but I'm sick of it.


Those who don't understand why "Amazon is buying Whole Foods to compete with Wal-Mart" should read this: http://loupventures.com/amazon-is-building-the-future-of-ret...

Amazon are not competing with just Wal-Mart. They want to redefine and compete in all categories of retail.


What is the value of Whole Foods without its pricy image?


>Amazon expects to reduce headcount and change inventory to lower prices and make Whole Foods competitive with Wal-Mart Stores Inc. and other big-box retailers, according to a person with knowledge of the company’s grocery plans.

That inventory will have to include GMO foods if they are serious about competing in that space.


Fractional Foods?


Maybe Amazon's competitive edge is that its investors don't demand current profits, like the shareholders do of every other company. They can price to break even or lose money.

I think I recall other retailers complaining about competing with a company that doesn't need to make a profit. It does sound difficult, and it is at least a bit quizzical that Amazon gets away with it. Then again, their strategy does seem to have worked.



This plan did not go well for Fresh and Easy.


Sounds like a smart move if they can keep the perceived brand identity for quality goods. WF has a lot of unnecessary overhead.


Jesus I have a feeling Amazon is a more ruthless Wal Mart with Automation and way better tech.

I know I'm buying their stock.




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