When Amazon purchased Whole Foods, everyone knew that changes were coming. A recent shift in strategy involves the way Whole Foods procures and buys the products on its store shelves. Rather than localized purchases by regional managers, the grocery chain plans to centralize most of its buying, moving more decision-making power to the national office.
There are several goals for such a shift. In particular, centralized buying saves money. Standardization is less expensive than customization, and the Amazon-owned version of Whole Foods likely needs to cut costs to remain competitive. Furthermore, Whole Foods promises that the new buying tactics will help ensure that each store has an appropriate product mix, spanning both small niche brands and large national brands.
In addition to this centralization, Whole Foods plans to eliminate the common presence of individual brand representatives from the aisles of its stores. Previously, local and small brands often sent representatives to a nearby store, who would then give away free samples, share their new or niche products with shoppers, and teach store employees about the products. But Whole Foods determined that these in-store demonstrations were not sufficiently effective for driving sales and instead proved distracting, such that store employees might spend more time chatting with the brand representative than restocking shelves.
The concerns surrounding such moves stem from their potential to eliminate the benefits of customization, some of which are key to Whole Foods’ market appeal. For example, the chain has long worked to build its reputation as a place where local vendors can gain access to an interested buying public. Although the company is quick to emphasize that such providers are still “crucial” in the stores’ product mix, taking buying power away from local management likely makes that effort harder.
In combination with the elimination of local brand representatives in stores, this shift seems likely to transform Whole Foods into a more conventional source for widely available groceries, rather than a quirky store that stocks products produced by the tiny farm just across town. Whole Foods promises though that its own employees will take over this role and introduce shoppers to less well known brands.
Thus the question of what Whole Foods will look like, now that it is an Amazon company, continues to be prominent. How much will change, and how much will stay the same?
Discussion Question:
- What are the advantages and disadvantages of centralized buying?
- Is Whole Foods’ move toward centralized buying beneficial or detrimental to the firm? Justify your answer.
Source: Tom Ryan, Retail Wire, September 26, 2017