By Heather Haddon and Annie Gasparro
Whole Foods will change the way companies can sell and market
their products in its stores beginning next year, one of the
biggest moves yet in its push to operate more like a traditional
market.
Under the changes planned for April, Whole Foods' 470 locations
will no longer allow brand representatives to promote their
products or check to make sure they are stocked and displayed
correctly.
Whole Foods also is centralizing much of its decision-making
regarding the assortment of products across the chain. Instead of
allowing brands to frequently pitch their products to individual
stores or regions, Whole Foods executives in its Austin, Texas,
headquarters will choose a higher percentage of the inventory.
The move was slowly getting under way before Amazon.com Inc.'s
deal for the chain in August, and its acquisition has added
incentive for Whole Foods to shift from its decentralized model and
become more efficient.
"This is another step in the conventionalizing of Whole Foods as
we know it," said Jim Cusson, of Theory House, a brand consultancy
based in Charlotte, N.C.
A Whole Foods spokeswoman said the chain remains committed to
offering local brands across its stores, and their streamlining of
purchasing will help ensure a mix of small and big products.
"Local suppliers and products are crucial to the success of the
company, " she said.
Amazon is hoping to boost sales at the struggling grocer, in
part, by standardizing operations and prices. Market reports show
traffic improvement since the deal closed last month, likely
because the chain lowered prices on key items like eggs and
milk.
Whole Foods' share of the U.S. grocery market jumped by upward
of 16% week-over-week in the first three days after the Aug. 28
price cuts, but is now trending up by more-modest margins,
according to inMarket location data.
The changes are among those expected to be discussed next week
by top executives and managers at the chain's quarterly meeting in
Seattle, a regional hub for Whole Foods and Amazon's home base.
Whole Foods representatives informed suppliers and third-party
brand representatives about the plans during a series of
closed-door meetings at an industry conference last week.
Whole Foods is unique among large retailers in the extent to
which it has let representatives of lesser-known products into the
stores to promote their offerings.
Some suppliers and natural-food consultants say sales of
specialty products could suffer because items such as chia-soaked
seeds and charcoal body butter require some explanation and more
marketing. Some consultants also say they expect local brands to
take their products elsewhere, rather than having to make a pitch
to Whole Foods' headquarters.
"This is a major inflection point," said Jay Jacobowitz,
president of Retail Insights, a Vermont-based natural-products
industry consultancy that works with independent retailers. "The
product mix at Whole Foods will shrink. The niche lines will
trickle out to other grocers."
Brand representatives in health and beauty currently educate
employees about how their products can help treat a customer's
allergies or other health conditions, one brokerage owner said.
Employees typically don't have time to learn about updated
products, an issue particularly when health goods are involved, the
person said.
"I'd expect the education and hence knowledge, of in-store
associates will diminish over time," Mr. Cusson said.
Other suppliers said they welcome the change. They said they
expect Whole Foods to begin offering brand advocacy themselves for
a fee that is similar to what they pay the third-party providers,
and that this arrangement could produce better results. "Whole
Foods' staff will know each other and the brands. You'd expect
higher service because of this," said Greg Fleishman, a
natural-foods consultant at Purely Righteous Brands.
A Whole Foods spokeswoman said having brand advocates in stores
is distracting to employees and inefficient. Whole Foods has had
them there for years, but sales declines in recent years have
brought scrutiny to the grocer's long-held practices.
The new system, the Whole Foods spokeswoman said, is intended to
save money and provide more consistent service and a national
approach to its locations. She declined to detail what Whole Foods
will do to make up for the work these third-party brand-support
companies have provided in stores.
"We are still working on that plan. But independent [providers]
are being eliminated," she said.
One company that promotes brands in Whole Foods' stores said it
is laying off half of its employees in response to the grocer's
decision.
Whole Foods recently came out with a noncompete agreement for
its employees, barring them from selling into Whole Foods if they
go to work at one of the brands it carries. The Whole Foods
spokeswoman said the policy is common to big retailers and it lasts
only a year.
Write to Heather Haddon at heather.haddon@wsj.com and Annie
Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
September 21, 2017 17:16 ET (21:16 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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