Call it a tale of two grocery stores.
In Seattle on Monday, Amazon unveiled its new grocery-store concept, Amazon Go. The gleaming high-tech store allows shoppers to grab items off shelves and scan them with their phone without having to deal with a cashier.
Meanwhile, Amazon’s recent grocery store acquisition, Whole Foods, has been the subject of complaints about shortages and empty shelves.
Whole Foods customers in Bellingham have been struggling to find English cucumbers and sweet onions. In Newton, shoppers have been disgusted to realize that the organic celery they purchased was mostly rotten. Shoppers in Hingham have complained about half-rotten bags of clementines, while those in Newtonville say they were unable to purchase tofu all last week.
Whole Foods has faced a tide of bad publicity in the wake of complaints and photos of desolate aisles posted on social media. And for shoppers accustomed to finding aisles of perfect produce, there’s general confusion about whether Amazon, which bought Whole Foods last summer, is to blame, as many assume the online retailer’s focus on low prices may be behind the decline. But Whole Foods’ Store employees and internal documents obtained by Business Insider indicate that a new inventory management system is the culprit.
The company did not respond to a request for comment, and has not publicly addressed the reports.
Industry analysts say the increased scrutiny on both Amazon and Whole Foods doesn’t bode well for either company, and may benefit other grocers.
Whole Foods has long been hampered by logistical woes, part of the reason the company was for sale in the first place, said Burt Flickinger, a retail analyst with Strategic Resource Group.
“Amazon does not understand the details involved in fresh food retail,” he said. “This is going to be Amazon’s retail version of Vietnam; it’s going to take three to five years to fix and at a really really high cost.”
The problem, he says, is the way Whole Foods sources its food. It uses an outside company, United Natural Foods Inc., as the distributor for the bulk of its inventory, while many other food stores, such as Wegman’s, BJ’s Wholesale, and Shaws/Star Market, manage distribution internally, and have been making investments in technology to ensure products arrive in stores at optimal freshness, he said. Meanwhile, Amazon has emphasized bringing down Whole Foods prices, while Flickinger said the company should focus on fixing inventory systems.
The current inventory management system, which is called order-to-shelf, has been rolled out gradually at Whole Foods stores across the country over the past few months, according to reports. One local part-time employee in a store north of Boston, who asked not to be identified for fear of losing her job, said she first noticed signs for the system about six weeks ago. The signs said the new system was a way to reduce waste and overstock.
“The idea is to have shipments come right off the truck and go right onto the shelf,” she said, and it has been a less than successful rollout. Busy weekends mean the store tends to run out of produce by Sunday evening, she said, but after the last snowstorm, it took far longer to restock shelves. “They were out of everything,” she said, and the shortages have felt more “intense” as of late.
For shoppers, empty aisles mean betrayal.
Kathy Goodfriend stops in the Whole Foods on Walnut Street in Newton three times a week, and she said part of the appeal has always been the aesthetics: the gorgeous pomegranate pyramids, the geometrically perfect tiers of grapefruits. “It used to feel like an overabundance of things,” she said. Now, “it feels like they’re cutting corners. When you walk around and the shelves are empty it makes you wonder what’s going on.”
Goodfriend found just a handful of “scraggly-looking” pomegranates during her shopping trip last weekend, and was upset to find the meat counter didn’t have ground pork. She went to another nearby Whole Foods to finish off her recipe requirements.
“It adds to my aggravation, because then I’m shopping twice,” she said. “It’s obviously sucking a lot of time out of my day.”
Katrina Palanzi of Plainville said she’s been ducking into her Bellingham store more often in the hopes she’ll be there when shipments arrive. She’s become accustomed to finding shelves devoid of milk, orange juice, and produce she’s come to rely on. “I figure maybe if I go another day, I won’t have to rearrange a menu in my brain while I’m food shopping,” she said.
The decline has led some to shop elsewhere.
“I can get organic foods for less money at Market Basket,” said Janet Rutan of Melrose, who said she’s surprised that Amazon would allow these inventory problems to persist, no matter what the cause. “If anyone knows how to do inventory, it’s Amazon.”
For 25 years, Whole Foods was out in front of other retailers when it came to big ideas in grocery shopping, but now it has let competitors catch up, said William Masters, an economics professor at the Friedman School of Nutrition Science and Policy at Tufts University.
“I’m a little surprised but not completely shocked that of all the retailers, Whole Foods would be the one that would go off the rails,” he said. “They had a pretty sweet deal for a while, with high markups because of quality perceptions, and store atmospheres that gave a health halo.”