The Amazonification of Whole Foods Goes Beyond Store Tech
Photo courtesy of iStock
About two months ago Amazon opened its first “Just Walk Out” Whole Foods store in Washington, D.C., replete with hundreds of cameras and surveillance technology that track everything shoppers put in their baskets and charge them after they leave. Like the Amazon Fresh dash carts that preceded this cashier-less store of the future, Amazon’s technological experimentation at Whole Foods drew plenty of media attention.
But Whole Foods has changed a lot more than its checkout systems over the past decade. Even before Amazon took over Whole Foods in 2017, the grocer was making moves to centralize its purchasing and bring down prices on its in-house brands at the expense of the local suppliers and regional autonomy that set the chain apart. Amazon’s acquisition cemented this strategy and ushered in more cost cutting, especially on the backs of workers. While Whole Foods still talks a big game about supporting local businesses and their workers, both groups have been shunted as the chain seeks to compete with dominant retailers. These business decisions exacerbate inequality by squeezing workers and cutting off an avenue for small food businesses to grow into viable larger competitors.
Before selling to Amazon, Whole Foods was a bit of a natural grocery monopolist itself. Through the 1990s and 2000s, Whole Foods bought up at least nine regional natural food chains including Fresh Fields Markets, Bread of Life, Fresh & Wild, and Wild Oats (for which it faced antitrust scrutiny). As the leading natural foods supermarket, Whole Foods became a key launching pad for innovative, regional, and more sustainable food brands. Brands such as Justin’s nut butters, Siggi’s yogurt, and Beyond Meat all got their start at Whole Foods before going on to compete with (or be acquired by) dominant food companies. “Before, Whole Foods was pretty much the place you launched brands if you were on a path to success,” says Zach DeAngelo, co-founder of Rodeo CPG, which supports food business startups. “That happens a lot less now for new brands.”
As an amalgamation of many chains, Whole Foods maintained high levels of regional and store-to-store autonomy. This created some headaches and inconsistencies for vendors, but it also allowed flexibility to work with local businesses. Local and regional purchasing staff worked with corporate buyers to create a growth pipeline for innovative businesses, according to Errol Schweizer, former vice president of grocery for Whole Foods. Amazon often gets the blame for Whole Foods’ shift away from regional buying toward more centralization, but in reality, these changes started well before the acquisition.
Schweizer says Whole Foods implemented more centralized purchasing, in part, to expand its private label 365 products as it tried to lower prices and compete with the likes of Costco and Walmart. But this strategy hurt profit margins, Schweizer says, and pushed Whole Foods to rely on negotiating better discounts from large food companies or charge more for local products, disadvantaging newcomers on the shelf and hurting sales.
These changes coincided with a financial downturn for Whole Foods, and the corporation cut labor costs to please investors. In 2015 Whole Foods laid off 1,500 employees, predominantly higher paid clerks and replenishment buyers at the store level plus a handful of buyers at regional headquarters. Whole Foods also incentivized managers to hire more part-time staff, moving from stores with roughly 80% full-timers down to 60%, according to Mother Jones. This squeezed workers and limited store capacity and autonomy.
Amazon’s push to streamline purchasing and further lower prices has meant even less regional buying and more labor cuts for Whole Foods.
For instance, in 2021 Amazon laid off some regional Whole Foods buyers and restructured into one company-wide purchasing team. According to Schweizer, this and other operational changes fundamentally severed Whole Foods’ local-to-regional-to-national pipeline that once helped brands grow. Whole Foods recently announced an accelerator program to support 10 new brands and 10 current Whole Foods suppliers to grow their businesses, but in Schweizer’s view, these new programs seem more like marketing initiatives than key sales drivers. “They’re not attaching the financials to it; to me that signals that it’s not a core category management function — its more public relations,” he said. “There will be some great local products in your stores, but it’s not going to be the same, where Whole Foods is transforming economies or creating this new generation of sustainable brands … You’ll have this bifurcation of hyperlocal brands plus a handful of well capitalized emerging brands, and then you’ll have big CPG [companies] still dominating these categories.”
While there are still regional foragers and some store-level purchasing, DeAngelo says that it’s harder for new brands to get a meeting with Whole Foods and those that do make it don’t receive the same support. “It is harder for local brands to get on the shelf, and way fewer get the opportunity to be local or regional,” DeAngelo says. “When you do [get in], you’re often put in more stores than you otherwise would have been prior to Amazon’s acquisition. [Before] they were much more patient with brands’ growth trajectory. Now … it’s like the up-or-out policy that Amazon is so famous for: If you don’t make it within six or twelve months, then they’ll move on.”
Amazon has also made it more expensive for growing brands to work with Whole Foods. Shortly after the acquisition, Amazon required brands with more than $300,000 in sales to charge 3% less for their products and pay fees for in-store demos that used to be free, upsetting some vendors, according to The Washington Post and Wall Street Journal. Amazon also introduced optional costly Prime promotions, for which vendors foot the bill.
For Taylor Fish Farm in North Carolina, the chaos of the Amazon transition was the final straw for its relationship with Whole Foods. Co-owner Valee Taylor sold farm-raised tilapia to Whole Foods in the mid-Atlantic and Southeast. When Amazon took over Whole Foods, he says the company dropped communications and left him hanging on a large order of market-ready fish, which he had to sell elsewhere for half the price. “I didn’t stick around much longer, I couldn’t afford it,” Taylor said. “Whole Foods was good for the moniker, but it was not vendor friendly unless you’re a big vendor [or] I guess if you’re real small … when you start trying to expand to the regional market, that’s where the problem comes in with Whole Foods.”
Workers also bear the brunt of Amazon’s cost cutting. Amazon has laid off hundreds of local marketing staff and some corporate operations staff, and trimmed store-level staffing. Amazon also cut health care benefits for part-time Whole Foods employees and pushed regional management to cut back on employees’ hours and overall labor costs in 2019.
Understaffed stores put more pressure on the workers who remain. Amazon adds another layer of coercion with its worker surveillance and strict performance metrics. In 2018 one Whole Foods supervisor told Business Insider that it “[became] normal” to see employees crying as they tried to keep up with new shelving systems and stocking score cards. Business Insider also reported that Amazon monitors how quickly its in-store shoppers fulfill delivery orders and requires that they hit certain hourly targets, similar to the order fulfillment pressures of Amazon warehouse workers.
New “Just Walk Out” stores not only threaten to replace cashiers with automation but introduce a new form of worker surveillance. Whole Foods says that the system frees up workers to engage more with shoppers, but according to Schweizer it also introduces new menial work, like vigilantly rearranging foods that were turned upside down or placed in the wrong bins so that watchful tech can accurately track inventory and sales.
Whole Foods has been vocally anti-union since failing to recognize a Madison store’s union in 2002, but under Amazon’s ownership, it has opposed worker organizing on a new level. In addition to disseminating new anti-union training videos, according to a corporate statement reviewed by Business Insider, Amazon used data analysis to create a heat map “designed to identify [Whole Foods] stores at risk of unionization.”
“Amazon is an autocratic organization,” says Schweizer. “Their profit model is purely extractive, meaning they need complete control over suppliers and workers.”
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