January 4, 2019
Amazon plans to build more Whole Foods stores across the United States, indicate sources, with the goal of adding more customers within reach of the company’s two-hour delivery service. The move is a transformation for the grocery store, which had slowed its growth in the years before Amazon’s 2017 purchase for about $13.5 billion. Although Amazon wouldn’t comment on expansion plans, sources say that Whole Foods staffers are searching for potential retail space in Idaho, Utah and Wyoming, which currently don’t have Whole Foods stores.
The Wall Street Journal reports that, “some of those spaces were about 45,000 square feet, slightly larger than the average Whole Foods store,” with extra space for “Amazon delivery and pickup from online orders.” Amazon’s Prime Now, a two-hour delivery offering, is available to Prime members in more than 60 cities, with online grocery pickup in as little as 30 minutes available at Whole Food stores in almost 30 cities. One source said that Amazon plans to offer these services to almost all its 475 U.S.-based Whole Foods stores.
“Strategic investments to improve Whole Foods will only increase the already intense competitiveness in the grocery space,” said Pentallect co-founder Bob Goldin. Amazon is also offering benefits to entice Prime members to shop at Whole Foods. According to a recent Numerator survey of “about 1,200 shoppers … nearly half said they were shopping at Whole Foods more because of Prime promotions.” This last Thanksgiving, Amazon’s Prime Now service delivered more turkeys than before, and “Whole Foods broke a record for Thanksgiving bird sales.”
Whole Foods has had poor morale and some employees are pushing to unionize. Company chief executive/co-founder John Mackey told employees he wants to address their concerns, “improve communication and focus on career development in 2019.” Amazon also said it would raise its minimum wage, including at Whole Foods, to $15 per hour. “At the beginning of the second year of this merger, we are going to pivot back to team member growth and happiness,” said Mackey. Another move will be to “restore a practice of making stock grants to Whole Foods employees.”
Another source said that profits at Whole Foods have suffered, as “Prime discounts have hurt margins,” even as Amazon is pushing to establish Prime programs in all the stores. Chief executive Jeff Bezos has a history of “investing heavily to boost growth,” and the company has “lost money or made a meager profit for years.” In 2018, Amazon “reported record profitability, including $2.88 billion on $56.58 billion of revenue in its latest quarter.”