Dive Brief:
- Whole Foods and Amazon are clashing over product standards, according to a Yahoo Finance report. The specialty chain has long upheld standards that bar products like Coca-Cola that contain artificial flavors and sweeteners, while Amazon wants to add these items to draw a wider range of consumers to stores.
- Critics say Whole Foods doesn’t offer a wide enough range of products, and point to the chain’s pre-acquisition sales woes as evidence that its product standards are bad for the bottom line.
- Meanwhile, Amazon will begin stocking its own private-label products inside Whole Foods stores, possibly as soon as this month, Yahoo reports.
Dive Insight:
Whole Foods’ standards boosted the company’s rapid rise and helped establish its unique brand. But these days, they may be bad for business.
Amazon wants to clear away these barriers keeping consumers from visiting Whole Foods stores. The e-tailer has instituted price cuts and is chipping away at the grocer's “Whole Paycheck” image with various promotions aimed at Prime members, including 5% cash back on purchases made through its Prime Rewards credit card. It’s also tackling Whole Foods’ exclusive product assortment, hoping to relax the chain’s standards in order to bring in more high-demand products and widen the chain’s customer base.
Yahoo’s report jibes with recent news that Amazon-Whole Foods is making life tough for small manufacturers by centralizing its buying and instituting new merchandising fees. Many suppliers are fed up with the retailer, while competitors like co-ops and even Kroger have tried to turn Whole Foods’ new policies into local sourcing opportunities.
Customer-centric Amazon wants to make Whole Foods more competitive with Costco, Kroger and even Walmart. The chain’s prices, which analysts note are 15% higher than traditional competitors, need to come down. And observers say the retailer needs to get off its high horse, too, and bring in more mainstream brands.
But this mainstreaming of Whole Foods carries a potential downside. Stocking products like Coke and Doritos can bring in more customers, but they could damage the Whole Foods brand, which, for all the company’s recent troubles, has remained a symbol of healthy and natural values. Striking the balance between these values and wider appeal is difficult — Whole Foods couldn’t find the right formula on its own — and Amazon needs to be aware of that delicate balance as it charges ahead.
