Whole Foods’ Existential Threat?

“Amazon’s plunge into the $800 billion US grocery industry posed an existential threat to rivals”: CNN, August 2018. So let’s see.

By John E. McNellis, Principal at McNellis Partners, for The Registry:

A couple questions remained in the wake of Whole Foods’ announcement last week that it was dropping prices on over five hundred items by twenty percent. Is this Amazon’s long-awaited spring offensive or is the grocer playing defense, treading water, simply trying to keep its market share? Stretched over a broader canvas: Is Amazon truly the existential threat to the grocery business the click-baiters would have you believe?

Before we get to existentialism, let’s consider a smaller question. Was it really a price reduction at all? Maybe not. The New York Times sent a couple reporters to shop their local Whole Foods for a basket of identical items before and after the ballyhooed price reduction. The total post price-cut savings was five cents on a fifty-five dollar purchase. The paper also used a Morgan Stanley study to report that Whole Foods prices are fifteen percent higher than those at a typical supermarket.

Even the kale and quinoa crowd can add, eventually. To keep paying a fifteen percent premium, they need to feel special about themselves and their supermarket. They need to know that their market is buying sustainably, doing business with the little guy, choosing only pesticide-free truck farm vegetables, wild salmon that have never seen a hatchery—let alone a fish farm—and so on.

That is not Whole Foods’ compass setting today. According to one grocery industry expert, Amazon is “in danger of breaking its shiny toy,” of destroying the Whole Foods brand, of dissolving its organic mystique. He pointed out that the company has cut ties with smaller, more esoteric suppliers in favor of focusing on bigger, national brands. In a word, this competitor says Whole Foods is becoming generic.

To this homogenization point, Amazon announced on March 1st that it would build or acquire about 2,000 brick & mortar supermarkets, averaging 35,000 square feet in size (full-sized markets run about 60,000 feet), selling at a lower price point than Whole Foods and with a different, as yet undisclosed name. This makes logistical sense for Amazon’s e-commerce business.

A nationwide chain of stores would both solve its last-mile dilemma and acknowledge the latest group-think about on-line grocery sales, namely that click and collect (ordering on-line but picking it up yourself) is more convenient than waiting at home for the delivery guy who availed himself of his state’s liberalized marijuana laws. 2,000 markets could put 90 percent of the US population within a mile or two of an Amazon pick-up spot. This would be brilliant for the company’s e-commerce business, but perhaps less so for Whole Foods. Running a supermarket chain is the hardest act in retail; ice cream gets freezer burn, books don’t. Running two different market concepts—one highbrow and one that deigns to sell Diet Coke — is exponentially more difficult.

And while the generic epithet may be sour grapes, the fact is Whole Foods hasn’t been knocking the cover off the ball since its sale to Amazon. Its in-store sales are flat, its more expensive home delivery sales are up a few percent, but its Prime members aren’t flocking to the stores in the hoped-for numbers, despite the company’s promotions and discounts.

Despite all this, the retail experts I quizzed are so in awe of Amazon (talk about mystique) that they believe the Whole Foods price cutting is an offensive move, intended to break the company away from the peloton, certain to cause the whole industry pain. One went so far as to say, “Since they don’t understand the business, they might as well take a meat-ax to it.”

I don’t understand the grocery business either, but having worked with grocers for the past forty years and built our share of supermarkets, I have a few thoughts. Service helps at the margin, but if you’re delivering the same quality, the business boils down to pricing and convenience. If Whole Foods is fifteen percent higher and noticeably less convenient than its competitors (we would have to drive past Safeway to shop at our local Whole Foods) then it better hang on to its mystique for dear life and sell stuff no other market carries.

And should click and collect truly prove out as the American consumer’s shopping pattern of the future, then Amazon better start building fast. With Whole Foods weighing in at 479 stores, the company would have to build or acquire every one of those 2,000 additional stores to achieve rough convenience parity with Wal-Mart (about 4,360 stores), Kroger (2,800) and Safeway/Albertsons (2,320).

Back to pricing. The bunker buster in the supermarket wars is automation. Amazon isn’t dwarfing the rest of the world for nothing. Put aside the morality, but if the company can replace everyone from the stockers to the cashiers with robots while its competitors are stuck with costly humans, especially unionized humans, it will win the pricing war and the consumers’ wallets, if not their hearts and minds.

The existential threat Amazon posed by its acquisition of Whole Foods was to Whole Foods itself. Whether the company will one day subjugate the grocery business with AI and robots or, like Fortunato in Poe’s Cask of Amontillado, be buried itself behind a wall of bricks and mortar, remains to be seen. By John E. McNellis, for The Registry.

This is how the Brick & Mortar Meltdown works for commercial mortgage-backed securities after America’s largest mall landlord defaults on a mortgage and walks away from the mall. Read…  A Simon Property Group Mall Generates Largest Loss Ever for Retail CMBS

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  108 comments for “Whole Foods’ Existential Threat?

  1. IdahoPotato says:

    I have a Whole Foods 7 minutes from my house. I prefer to drive 20 minutes to Natural Grocers or 10 minutes to my community-owned co-op.

    Organic, local, sustainably sourced, and cheaper than Whole Paycheck.

    • Joan of Arc says:

      Perhaps millennials can’t differentiate between a 15% increase or decrease in a grocery bill, especially if it is avocados.

      • IdahoPotato says:

        They sure can. Most of the people in WF I have seen are wealthy Gen Xers in yoga pants grabbing a coffee with girlfriends or groups having business meetings at the upstairs wine bar.

        Not too many millennials. But then I live in flyover country, not Sillycon Valley.

      • robt says:

        We have a couple of supermarket chains in Canada, where prices are typically 20 to 50% higher than other stores for the same name-brand products. Even their no-name substitute brands are higher than name-brand in other stores. I do admit I occasionally go there to cherry-pick the weekly specials and thus observe their behavior.
        These higher-priced stores will be packed with customers whose carts are full, apparently unaware that they are spending 50 dollars or more extra on their weekly shopping trip for their basic food requirements.
        Never overestimate the intelligence of the average shopper of a certain age.

        • KMOUT says:

          Stick the word HEMP in the label and the sheeple flock to it for a higher price. The dog shampoo section at Lassens has shampoo with an undisclosed amount of hemp oil in it. You oughta see beardo the weirdo lap that isht up.

        • Les Francis says:

          And have a look at those full carts.
          24 can boxes of soda. Boxes of processed dried food. Giant plastic packages of French fries. Huge plastic packs of candy.
          Zero green leafed food. Zero Fesh vegetables – maybe plastic packed ones already processed. Maybe some meat vacuumed packed in plastic.

        • Markar says:

          Might explain why Canadians have the highest debt/income ratio in the western world.

    • Kenny Logins says:

      Amazon won’t be able to help themselves when it comes to turning “evil” like most big food retailers do.

      By definition, local, fresh, seasonal produce can’t be done on huge scales needed to make the economies of scale work for a mega-corporate to be effective.

      Didn’t we see a similar article on here about craft beers being bought by the big brands?
      It works at first, but then everyone just moves away to true craft beers again because the products are made for wider market appeal.

      • Wolf Richter says:

        Yes, you saw these articles here, how craft brewers got bought out by Big Beer, and then the beer changes as the corporate cost cutters take over. Now craft brewers have trouble maintaining their sales. Go figure. Some companies think that consumers are idiots and don’t notice this kind of stuff. But that’s not true for all consumers :-]

        • joe saba says:

          remember big business controls GROCER SPACE and SMALL GROCER SPACE including 7/11, circle K, quiktrip
          they got your space you want = so sad to bad
          want to compete then get biggy on your side – of course quality product suffers

    • 91B20 1stCav (AUS) says:

      Interesting that the old ‘Whole Paycheck’ moniker (well in advance of Amazon’s purchase) is well-known outside of my own residential area (Sonoma County). Albertson’s didn’t do Safeway customers any favors, either, with their acquisition. A better day to all…

    • Semper Gumby says:

      I used to have one pretty close here in Atlanta. Seemed to be doing real well and then it closed.

      Don’t know why. Must be part of “the plan” what ever that is.

  2. Mortinio says:

    You just said it – Community Owned!! – Co-op movement, perhaps we can take back power and wealth?

  3. Wendy says:

    I never quite understood why Amazon bought WF. Whole Foods is mainly upscale, catering to a limited population, where the masses are outside this demographic—closer to Joe six pack. If Amazon stocks all the common unhealthy items that the average American buys (think Doritos, and a Diet Coke), they will alienate the smug, cost insensitive, traditional WF shopper. Since Amazon should have bought WalMart, but couldn’t, I suspect they will have to acquire another chain store to solve the “last mile” warehousing and distribution problem.

    Whole Foods looks like an experiment, and I would not be surprised if they bought another chain to get more locations, and appeal to the middle and lower end of the economic Bell curve. Maybe Dollar General is next.

    • Thomas Molitor says:

      Wendy, why do you characterize the WF shopper as “smug” and “price insensitive”? Do you have data to support your generalization that WF shoppers are “price insensitive”?

      Why since the Amazon acquisition would WF lower their prices if their shoppers are “price insensitive”?

      What’s more, consider your class-conflict equation: “price insensitive = smug”? Where does this generalization come from?

      For many WF shoppers, the WF shopping experience is worth the premium prices over mainstream grocery chains. I have also found most of WF departments to be of higher quality (meats, fish, produce) than mainstream chains.

      What you might also wish to consider is the subjective value of buyers, i.e., buyers that rank food quality/shopping experience higher on their satisfaction ladder than other product categories in their life.

      All human action explanations that have nothing to do with “price insensitivity” and “smugness.”

      • Mark says:

        Sounds to me like you do not like being called smug.

      • Wendy says:

        Without getting into a class warfare debate, all I can say is that if you were able to kidnap 100 shoppers from Whole Foods and another 100 from Dollar General and put them on either sides of a room, you could make following observations from a quick verbal survey:

        1. The Dollar General shoppers would be very price sensitive, and the WF shoppers much less so. Kim Kardashian would not be in the DG group.

        2. After looking up the word smug in the dictionary, the DG shoppers would say that’s exactly what the WF group is, and the WF shoppers would smugly enquire, “what evidence do you have to say we are smug, and price insensitive?”
        After the DG shoppers burst out laughing, the puzzled WF shoppers would still be puzzled, but counter by saying “for many WF shoppers, the WF shopping experience is worth the premium prices over mainstream grocery chains.” More laughter.


        • Thomas Molitor says:

          Now you’re speaking for DG shoppers? I happen to shop at both DG and WF for different reasons. I guess that makes me “half smug”? Who needs purchase data or focus group findings when we can simply ask you?

        • Uncle bob says:

          You would also find the price sensitive shoppers willing to accept much lower quality produce and meats without regard to their origin (mostly from China in the case of places like Jewel).

          There will always be people willing to pay for higher quality, especially when it comes to food. I’m not sure why the price/quality of food in particular seems to be so contentious among some people. It does seem to touch a nerve though.

        • Bobber says:

          Thanks for the smug comment about being smug.

        • Wendy says:

          Hey, don’t kill the messenger here. At least Kim Kardashian can identify with the DG shoppers since she has a DG logo on her handbag.

        • Rowen says:

          The people who buy groceries at Dollar General or Dollar Tree aren’t as price-sensitive as you’d think; they buy them there because these predatory groceries are often the only choice in food deserts. And the corps know it and price accordingly.

        • Lion says:

          Wendy, fully agree with you. I purchase quality at or above WF, but at far lower prices by shopping around. But, I personally don’t place a great value on the “Nordstrom Grocery” experience that apparently WF provides.

          Maybe if our family had twice the income we do, I’d go for the WF experience. But not likely this lifetime.

        • RD Blakeslee says:

          Sorry to see this ad hominem stuff creeping into Wolf Street. There’s PLENTY of it elsewhere.

          This Wolf Street fan doesn’t care who is smug and who is not.

        • I agree. I would prefer to do without the ad hominem talking points, and stay with the issues.

      • paul whalen says:

        For the second time in a year, Whole Foods Market has been slammed for ripping off shoppers by selling products with the weight incorrectly labeled. The New York City Department of Consumer Affairs (DCA) on Wednesday released the results of its ongoing investigation that contends the high-end grocer routinely overcharged customers by overstating the contents of prepackaged foods. The discrepancies resulted in overcharges of 80 cents to nearly $15 per package, according to officials.

        In addition, the DCA said that 89 percent of the packages it re-weighed failed to meet the federal standard for the maximum amount that a package can deviate from the actual weight. DCA tested 80 different types of pre-packaged products including meat, dairy, and baked goods.

        You’re right- maybe it’s just ol’ fashioned conspicuous consumption.

      • Javert Chip says:

        Wow. Impressive illustration of a defensive reaction.

        I’m afraid to ask TM if he has data to support his generalization that WF shoppers find “the WF shopping experience is worth the premium prices over mainstream grocery chains”.

        I’m DEFINITELY with Wendy on this.

        • Ed says:

          Smug reply?

          (And I shop at HEB, a wonderful chain, cheaper than the competition. Dollar General has no presence in cities in Central Texas)

          It is weird to call Whole Foods shoppers smug. Price insensitive they are.

        • Mean Chicken says:

          I used to shop at HEB (Hairy Enormous Butt), it was a run of the mill grocery store at the time, not fancy like Whole Foods.

      • Petunia says:

        WF is an upscale shopping experience, that’s why people shop there, they are buying exclusivity. It’s the same crowd that buys $6 coffee, they don’t want to mingle with the riff raff.

        People think of Amazon as a discount retailer but from the beginning it was never about price. It was about attracting an upscale well educated customer. No activity defines an educated affluent consumer better than books which are delivered to their homes.

        I think WF lowering prices is a stunt to attract more Prime members.

    • Rowen says:

      From what I understand, AMZN purchased Whole Foods to enter the grocery market at the high end to avoid antitrust scrutiny, which would no doubt be egged on by WMT. But if you GOOG “amazon low end grocery”, there are numerous reports of it having plans to enter the low end market once they get the foot in the door. EBT yum yum!

      Once all the pieces gets integrated into a fully sentient Flex/Alexa, watch out!

    • polecat says:

      Might as well call Whole Foods 20% Credentialed Grub !

      My experience with Whole Foods is as follows:

      Stepped in once … Stepped out forever !

    • EchoDelta says:


    • KMOUT says:

      Whole Paycheck is a VIRTUE SIGNALING export mechanism. Being a higher income individual, I loved the quality and display. But I didn’t get wealthy being fooled by the idiocy of having “Hemp” or “Fair Trade” on the label.
      Seeing thos wood floors as I walked in for the first time told me everything. THERES AN MULTI FACETED EMOTIONAL PLAY going in here and we will be relieving you of your excess cash for a feel good experience.

      • J Bank says:

        You’ve got the right idea. Whole Foods is the Mercedes Benz of grocery stores. I don’t know why people are making such a big deal out of it… there are quality tiers for all things, including retail. Whole Foods tapped into it.

        The funny thing, as a Sprouts shopper (and occasional Whole Foods shopper for specialty items), Sprouts is significantly cheaper on almost everything with very similar if not exact qualify.

        The difference? Cleanliness and appearance of the store and staff. That’s it. I can forego my “premium experience” to save 50% on my grocery bill though. Of course, some won’t.

    • Julian says:

      Retail is a dying industry (said by someone around here), why would Amazon but any more firms in such a dying industry?

      It makes no sense. ZERO SENSE.

      • Wolf Richter says:


        Half of brick & mortar retail is dying: the mall stores, such as department stores, apparel stores, musis stores, shoe stores, etc. They account for about 50% of retail sales, and that end is doomed. If they have good e-commerce sites, their e-commerce business will thrive though.

        The other half — such as car dealers, gas stations, grocery stores, etc. — whose products Americans don’t yet buy much on the internet are doing OK.

        Note that Amazon did NOT buy a department store. It bought a grocery store. Grocery stores are not thriving. The business is very competitive with thin margins and little growth. But that’s where Amazon went — not mall stores.

        Amazon SHUT DOWN its booths in malls just a months ago, seeing how badly malls are doing.

  4. This sounds like a deal breaker for WalMart, which had a policy of building on the outskirts of town, (or edge of two towns) all things being equal (and they are) teh consumer will choose the closest shop. Ironic at the demise of retail malls that retail grocery would expand its B&M presence. I stopped shopping WM last year, poorly stocked shelves, higher prices, long drive.

    • GrassRanger says:

      Your negative experience with Walmart is strictly a function of local (store management) issues. Amazon or any other company is going to have the fight of its life to beat Walmart in the grocery business. I was in a 4 acre Walmart this morning at 9 a.m. and there were only 5 people running the whole front of the store; one “greeter” at each of two entrances, one at the customer service desk, one checker, and one watcher of the do-it-yourself checkout. Of course this was a slow time of the day and there were others at work in other parts of the store, but Amazon is not the only company that can do automation.

      • Thomas Molitor says:

        I have been impressed how Walmart has executed in the grocery category. I was skeptical when they first announced they were going into groceries (10 years ago?), but I see clean presentation and wide-choice in all product categories in all the stores I’ve visited. You’re right, Walmart is not easy prey.

      • WM store managers do not set price, or location. I did try the WM in a nearby (more upscale) community on the advice of a friend, though the store is smaller, less of a selection, at least all the holes were filled. However I would have to drive even farther to that store. I do have some friends locally who won’t shop at WM because of the people who shop there. It’s amazing how many of the homeless look just like you and me.

        • Thomas Molitor says:

          Homeless attire is very fashionable indeed. I buy my ripped blue jeans from Goodwill for $8. Others may buy their ripped jeans at a department store for $125. Do you remember the days of *designer jeans* such as Jordache and Sergio Valente? The difference between Jordache and Goodwill certainly pays for a couple of bags of organic groceries from WF.

      • Rowen says:

        The practice of not cutting meat locally because they don’t want the butchers to unionize is a deal breaker.

        • Ed says:

          Yeah, meat and produce quality drives a lot of grocery shoppers’ choice of store. For sure.

          My wife has forsaken HEB over watermelon quality, choosing Wal-Mart. This won’t make the quarterly report of either store, methinks, but it illustrates the point.

    • Petunia says:

      No matter how broke I was I never shopped at Walmart. I don’t like their business practices and don’t want to support them with my limited funds. I do fine shopping sales with other supermarkets and discount stores.

      • Bobber says:

        I just read that Walmart processes it’s own milk now and is buying raw milk from huge suppliers, thereby cutting out small producers and processors. They are selling milk at a loss to drive out competitors. Killing small retailers wasn’t enough. Now they are killing small producers too.

        With antitrust division asleep, everybody is striving to be too big to fail.

  5. SocalJim says:

    The idea that Amazon kills competition in any segment it enters is misguided. The grocery segment is price competitive. Grocery shipping costs are very high. Little risk here.

  6. Iamafan says:

    Our Whole Foods is on the same strip as Costco, Walmart, Stop & Shop, Shop Rite, Trader Joe’s and smaller upscale groceries like Palmer’s.
    I buy from Whole Foods because the steaks and chicken are good AND it has butchers.

    If I want something different, I go to the Asian stores like H-Mart (Korean), Patel Bros. (Indian), the smaller Japanese (not Chinese), and the local fish stores. Nothing beats the Japanese for fish.

    The rest of the groceries are useless. Stop & Shop is currently on strike here.

    • Thomas Molitor says:

      >Our Whole Foods is on the same strip as Costco, Walmart, Stop & Shop, Shop Rite, Trader Joe’s and smaller upscale groceries like Palmer’s.<

      Lucky you! It appears groceries are high on your satisfaction ladder. To me, one store can't be all things to one person. I shop Whole Foods for the same reason you do, but Costco is awesome for a lot of other stuff. Trader Joe's is kind of an Easter Egg hunt, never know what's hiding beneath the bush. I don't have the answer, but I'd like to know what percentage of grocery buyers shop at three grocery stores or more regularly?

      • IdahoPotato says:

        I do.

        Boise Co-op.
        Natural Grocers.
        Fred Meyer.

        I was in Whole Foods recently to meet a friend and was amused to see a bag of sugar labelled “gluten free”. I wonder why they left out “fat free”, “protein free”, “nut free” and “egg free”.

        • IdahoPotato says:

          And I left out the employee owned Winco.

        • Just Some Random Guy says:

          I’ve seen water bottles labeled Gluten Free.
          What a time to be alive!!

        • Stan the Man with the SHTF Plan says:

          If I don’t get my gluten I come down with the shakes; my nerves can’t handle it.

      • Clete says:

        We do: Publix, Walmart, Costco — different strengths for different needs. Plus the local farmers’ markets and the occasional Winn-Dixie.

        • Mean Chicjen says:

          Not laughing, I actually know someone who maintains glutens could deliver them an instant death.

          me: – ???

    • Paulo says:

      They don’t have butchers, they have ‘meat cutters’ running the departments. (My brother-in-law). A real butcher(s) that actually knows the business, are as rare as shoe repair stores that know how to fix and build custom boots. They usually have their own shops.

      I shop prices and build our weeks menu around loss leader sales. Do I need to do this? No, but when my kids were young it was the difference in ‘making it’. My wife, who never had kids, can’t shop her way out of a wet paper grocery bag…..just saying. We don’t have WF in Canada, but we have boutique stores just like them. They’ll have a good sale just like everyone else, but the aisles kill you. My in-laws have been in the grocery business their whole career and currently work for one. Their store looks upscale and awesome to customers, however, they are concentration camps to work for unless you are management. Then, it’s bearable. There are a few rules the in-laws live by. Have a list and know prices before entering, don’t buy hardware, lightbulbs etc at the grocery store, and always avoid the piles that look onsale at the end of every aisle. They are usually old stock products. Big sale items are usually very old stock the store picked up at a bargain. Check the expiry date, for sure.

      I also know who the store corporation owners are before I patronise any of them. Jimmy Pattison is a BC store owning billionaire who is also a union busting a#$hole. I don’t enter his store. Is Bezos any better? I think the jury is still out on that one. WalMart? We don’t shop there as they play customers like fools. For exampe, they’ll sell products in $5 increments as opposed to by the pound. They’ll advertise $15-$20-$25 turkeys this Easter. What does that mean? I shouldn’t have to throw the bird on a scale to see what they are really charging.

      • Thomas Molitor says:

        “We don’t have WF in Canada,…”


        • Toronto, Vancouver and Ottawa. Our nearest Whole Foods is 8 hours to the south, in Minneapolis, across an international border, or 1000 miles+ to Toronto. I would like to have a Whole Foods for the expanded selection of items (fresh salsa and orange juice, just for example).

      • Javert Chip says:


        WM playing customer like fools?

        I doubt it; WalMart customers are price-sensitive and WalMart is probably simply pricing in a convenient way for their customers.

      • I buy whole chickens even if parts are the same price because i have to clean them up either way. A whole chicken is easier to do rather than half breasts after the guy in the meat dept has messed it up.

  7. Peter Starr says:

    Only if one believes in drone-delivered organic vegan GF healthy salads does that purchase make sense. What were they thinking?

    • Thomas Molitor says:

      Maybe brick-and-mortar acquisitions are loss-leaders for Prime membership enrollment? Keep in mind Amazon did buy a profitable company in WF. Check out this:

      >This statistic shows the number of paying Amazon Prime members in the United States as of December 2018. As of the last measured period, the source estimated 101 million Amazon Prime subscribers in the United States, up from 95 million in June during the same year. On average, Amazon Prime members spent 1,500 U.S. dollars on the e-retail platform per year. June 2017 data also states that non-Prime members only spent 600 U.S. dollars annually.<

      That's 101 million x $129/a year. The stat I haven't found (maybe it's undisclosed?) is how much WF has driven new Prime membership?

      • kam says:

        Seems a bit hard to believe. 101 million Prime users? One out of 3 Americans? That is $13 billion.

        • Wolf Richter says:

          Yup, seems right. I just looked it up. You made me do it :-]

        • Petunia says:

          Amazon markets memberships to college students at a discount. The students need the memberships to buy books and course materials. My son got a 50% off offer for life, which a few years later was rescinded to regular price. That’s one way they grow their membership.

        • char says:

          How many household are there in the US? I assume prime membership is per household.

  8. ursel doran says:

    As I recall many decades ago from marketing 101 class the grocery business has a margin of 1.5 – 2.0%. With WF having a 15% margin, supposedly, is it possible Bezos got bagged by a touch of greed?

    Remember that Amazon operated for many many years without a profit at all, piling on debt from wall street, Continuing to lose money on higher volume will not make up for bottom line profits once the wall street crowd catches some reality.
    See Tesla for example.

    • sierra7 says:

      “As I recall many decades ago from marketing 101 class the grocery business has a margin of 1.5 – 2.0%.”
      What they don’t tell you is that that percentage is turned over many times a month……and year. Just saying…..

      And, for other commenter about how many AP members there are many of my friends are Amazon Prime members. I am not. Lucky if I spend $150 year for books or some misc. item I can’t find at local/regional store(s).

      Years ago surveys always highlighted “why” people shop in certain stores. One of the primary reasons is “…..personal contact with others other than the empty house they came from!” “Shopping” reasons always included that personal contact experience including the most important one, the checkout. The “checkout” experience could make or break a store.

      The major big box stores seem to be wanting more and more automation and less human involvement in that shopping experience. A more sterile atmosphere will eventually snuff out the good experiences.

      These changes are taking place over many years. I hate to think of what that will be like decades from now.

      • char says:

        People want to stand in the check-out line? Subconscious i wouldn’t be surprised if they do.

  9. Rcohn says:

    I shopped one time at Whole Foods 365 and will never go back.Fish and meats all prepackaged . I do not have a Whole Foods near my current location. When I do travel to areas that have Whole Foods. I will usually do some very selective shopping.
    They have superior fish and fresh meats. They also have some items that are not available elsewhere. Their produce is usually very good , but overpriced, so I am very careful what I buy. I avoid anything else not specifically on sale.

  10. Lion says:

    I’m fortunate in that my wife is a very good value-add shopper. A while back we once shopped WF. Neither of us could see ANY value-add to their store and products. If I wanted to heavily overspend, I’d shop at our Vons Pavilion (which is a very nice store).

    We used to live in Washington state a little east of Tacoma. Really miss the “real” farmers markets we had there.

    • Dave Kunkel says:

      My wife and I occasionally go to Whole Foods just for laughs – we never buy anything.

    • RD Blakeslee says:

      “… the “real” farmers markets …”

      We have those here, in Eastern West Virginia. We are lucky, that way.

      • Wolf Richter says:

        RD Blakeslee,

        Thanks! Folks get carried away sometimes, it seems.

      • robt says:

        An investigative reporter did a study on the ‘real’ farmers’ markets around Toronto and found that a large number of them just bought their fruit and vegetables at the wholesale mega Food Terminal, removed the labels and claimed they were grown on their farms, using all the current buzz-words like eco-friendly sustainable locally-grown, organic, etc.
        They get premium prices, the customers are happy because they’re supporting the small farmer and the food tastes so much better than mass-market food.
        A lot of farmers are actually quite notorious for ripping off the city slickers – it’s a tradition.

  11. Disgusted in Mount Pleasant says:

    Whole Foods was declining before Amazon but the pace has accelerated. We were eager supporters for many years but now probably spend half or less of what we used to spend there and only go when we have to.

    Choice and quality (which were the point) have diminished drastically. Can’t comment on the fish and meat as we’re vegetarians but everything else has got worse and continues to do so.

    • HR01 says:

      Disgusted in Mt Pleasant,

      Correct, WF was in serious decline for years prior to the buyout.

      Fifteen years ago, the quality of WF offerings was a cut above most others. Decline set in as we read of multiple health code violations at its food processing facilities.

      We have a WF less than two miles away but the site is anything but “convenient”. Located on a very busy commute route in an old, tiny store with very little parking. We used to shop there for a handful of items but had ceased entirely prior to the Amazon purchase.

      Amazon displaying immense hubris believing that it can take over the grocery store industry. The company will sustain serious damage in this ill-advised venture. The old mantra we used to hear from Bezos was something akin to “your margin is my opportunity”. Good luck picking up the pennies in front of the bulldozer in this business.

      The longer-term winner from this vantage point appears to be Kroger. Kroger continually invests in its stores, constantly renovating or restoring. We have at least five Kroger stores within three miles of us. The flagship location was in need of some serious renovation. Rather than simply make improvements, the company bit the bullet, tore the old one down and started from scratch. Built a brand new multi-story building on the same footprint with two levels of underground parking. Took two years to build and cost more than $65 million. That’s some serious commitment.

      Just food for thought as one wonders how Amazon plans to build 2000 new stores.

      • RD Blakeslee says:

        The best main-line grocery store hereabouts is a Kroger’s store.

        The regional WalMart is crowded, badly stocked and difficult to shop in.

      • HowNow says:

        Imagine that Amazon reaches the scale where it can initiate its own payment system – it’s own credit card or something similar. Seems to be a no-brainer. It’s collection of consumer’s behavior will be well beyond anything else out there, knowing what you’re likely to choose for entertainment, the odds and ends you buy or search for, and now your nutrition and eating preferences. I would think that Whole Foods could serve as a small “loss leader” for Amazon while it extends its feeding tube into your personal life.

  12. HudsonJr says:

    I’ve always presumed some of the purchase was for product data purposes. Some of that data can be purchased, but you are at the mercy of the providers as to what you get and when you get it.

    They could try to tie internet customer offers to individual purchasing habits. If there was a rewards membership scheme, they see you buy pork butts, spices, and BBQ sauce and maybe they offer you a deal on a smokers, accessories, or cookbooks.

    Or if they wanted they could just aggregate their data, and sell it to the folks that compile CPG data reports as their business. Or they could trade their data for access to other data from those same businesses. Or maybe they want to take on Neilsen and others in the data business.

    • Thomas Molitor says:

      Good points. Every time I shop at WF I scan my Prime OCR to get the Prime discounts. Now Amazon has offline purchase data on me. How best to leverage that data is in their integration strategy book, for sure.

      • Rcohn says:

        I’ll bet that profitability at Whole Foods is still higher than at AMZN’s retail operations. Without AMZN’s cloud operation , they would be out of business

        • DallasTX says:

          Amazon makes most of their money off of third party sellers. I sell books on their site. They get a fee of 25%. I carry and pack and sell the books. They just put it on their site. They will not be going broke any time soon.

  13. Kent says:

    “Whether the company will one day subjugate the grocery business with AI and robots or…”

    I’m waiting for any company to subjugate an industry with AI and robots. Both are just snake oil at this point. Slick advertising for the under-skilled offspring of the over-class who have too much money available for bamboozling.

    Amazon is a giant success because investors were willing to subsidize sales at a loss in exchange for rising stock prices. Amazon no longer seems to subsidize prices at all. But they have something you can’t get at a B&M: selection. That’s their great advantage.

    Bezos is making the same mistake as fast Eddie Lambert: thinking that success in one area (on-line sales, running a hedge fund) translates into being a successful B&M operator. B&M operations are the realm of skilled men and women who have to make daily decisions on trade offs in design, floor space, selection, prices and a myriad other things. You have to have actual skills. Not just access to endless piles of Wall Street capital and some luck in timing.

    • QQQBall says:


      I dont think so. My GF toured the BMW plant in SO. Carolina and she still raves about it. The AI/robot designs will improve over time. Change is coming and not just blue collar workers.

      • Automation is definitely coming, in part, for the same reasons we offshore to China (that is, bad central bank policy). But that only speeds it up.

        • p coyle says:

          automation will proceed, until indentured servitude makes a comeback.

          can’t have debtor’s prisons this time, it stigmatizes debtors, who are, afterall, the lifeblood of the economy.

          someone, surely, will devise a foolproof plan to save people from themselves. say, a dave ramsey type who tells you that you can keep the boat, if only you commit yourself to a 7 year plan…

  14. Michael Engel says:

    1) AMZN 2000 supermarkets will become nodes in a network of a transport hubs.
    The cost of delivery by UPS FedEx and USPS, or
    their disconnect are AMZN biggest threats.
    One of them, or any combination ganging together, can cut AMZN veins.
    2) AMZN will become a more dominant player in the US economy, more data on the individual consumer.
    3) AMZN Bezus = Napoleon

    • nicko2 says:

      Amazon can simply buy them out.

    • Dale says:

      In my area, Amazon hasn’t used Fedex or UPS for a couple of years. Instead they use their own delivery service, which is like Uber for packages.

      • Ridgetop says:

        Same in the S.F. Bay Area, but you cannot tell if they work for Amazon or not, you don’t know if they are delivering a package or stealing one already left off by UPS ,USPS or Fed Ex. We have a lot of package thief’s around here ( They will drive/walk up with a fake package, drop it off and then pick up one that was already delivered).
        At least UPS knocks on the door when they deliver in my area. USPS will knock and if they think I am home wait for me to answer and hand deliver it! I had one Amazon delivery where they left the package at the driveway/ street entrance! Didn’t know it was there until I received the text notification.

  15. Clete says:

    Anecdote, may not be universal: The WF in Fort Myers, Florida on The Other West Coast opened a few months ago, to great fanfare from the local Gannett newspaper (until they stopped buying advertising). The store is about 10 miles from the affluent population centers of Fort Myers, Cape Coral, and Bonita Springs.

    Before they get to WF, shoppers will pass a minimum of 4 Publix (excellent produce and fresh meat/fish), a Costco or two (good quality and cheaper by the pound if you have all day to stand in lines), and a variety of Walmarts and Aldis (all cheaper by a lot). In addition, we have a real farmers’ market, with locally grown produce, open every day of the week somewhere around town.

    It isn’t that WF doesn’t have a niche among the Prius/Tesla crowd, but they will never penetrate further into the market because they are simply not offering anything unique at reasonable prices.

  16. HowNow says:

    Hats off to John McNellis! Absolutely excellent and poignantly written article. Forced to (wanted to) look up “peloton” and a summary of “Cask of Amontillado” – best metaphor going. But, truth be told, Amazon and grocers aren’t the only ones dueling over existential threat – we all are. Time to set smugness and humility aside and consume less crap..

  17. nicko2 says:

    I order about 90% of my food online, fresh, meat, dairy, veg, organic — you name it, delivery is cheap and within an hour or so. Perks of living in a fast growing megacity. All bricks and mortor are living on borrowed time.

  18. Jack says:

    “Even the Kale and quinoa …..”

    Since we’re talking about Food, let’s ponder this angle, Take this extract from a documentary called “ FOOD.inc” which many of you might be familiar with;

    “The whole food production system is geared up and operate on a single virtue of efficiency,”

    “However the system( Food production) is very weak as it’s not equipped to deal with shocks,

    – We grow very small numbers of crops,
    – Very small number of verities.
    – Very small number of companies
    You will have a breakdown eventually

    One farm sample uses 40 000 galleons of diesel

    To bring a steer to slaugher it takes 75 gallons of oil!

    This highly efficient machine does not have the resilience.”

    So the Kale and quinoa Party !might Not be the most intelligent part of human society per se

    ( at least Not the meme , drones or the blind followers that are always eager to follow the next Instagram, FB or Twitter trend!).

    Those who don’t fall in the superficial category have figured out that

    “having less verity of food sources and method of production could ultimately be detrimental to the long steady process of evolution that ( Farmers carried out throughout the last 10 000 years of human settlement, and agricultural development)

    My point here is , the likes of Amazon ( FAD) might leave a sizable portions of the market in (Awe ) of its “innovation “.

    Those who look beyond this stage of human economic activity and market experiments with socialism, capitalism or the current ( crony capitalism that’s all the rage now!)

    Will have undoubtedly reach the conclusion that our Future here is at stake,

    to allow very small number of businesses to control the supply of :

    ( Not the inessential, but the Essential )

    aspect of our being will ultimately cause a major catastrophe and lead to a rewind of the “ efficiency” hyperbole in favor of resilient and longevous production methods ( as a sure outcome and a backlash against the hegemonic forces that tries to bag the whole market in the name of Vertical or horizontal integration)

    So called it what you will, the long term Endurance of the likes of Amazon will be harshly tested in the Not too long Future.

    and while parts of the concepts behind such businesses might seem benign or even better still contributory to our quality of life , the dangers that these monoliths pose to all of us ( collectively and in the long run ) IS IMMEASURABLE.

    Go Kale Party! :)

    • Michael J Bernard says:

      I am tempted here, as always, to quote the final paragraphs of Notes from Underground. As prescient as it seemed then it becomes more so by the day.

  19. KY says:

    I went into a brand new Whole Foods in Florida The only thing I found I wanted to buy was a soda. Upon entering, the place looked fantastic. But on a closer inspection, I really couldn’t think of anything I wanted to buy that wasn’t in a smaller Publix.

  20. Just Some Random Guy says:

    What I’ve noticed at WF is people buy just a few things. You never see someone rolling up to the cashier with a grocery cart full of stuff. It’s always a couple of items in a basket.

    It could mean one of two things. It’s the same people going to WF every day to buy a few things. Or WF is a speciality store where people treat it as a special occasion type of store. I’m really not sure which it is.

    For those who say it’s for upscale people, I dunno about that. I suspect it’s more the $30K millionaire types who want people to think they’re upscale.

    Personally I eat there when I travel on business and expense the meals to clients. But when it’s my money? I’d have to have a hole in my head to pay WF prices.

  21. Mark says:

    I discovered Almond Butter at WF when I first shopped there a few years ago. A small jar was $19.00, which I bought until I discovered ALDI, where the exact same size Almond Butter jar is $4.89!

    Needless to say, I don’t shop at Whole Paycheck anymore, but I do like Aldi. :)

  22. Adam says:

    “Even the kale and quinoa crowd can add, eventually”.


  23. Unamused says:

    =>“Amazon’s plunge into the $800 billion US grocery industry posed an existential threat to rivals”

    Monopolistic practices are legal now, like fraud, so consolidating the existing oligopoly won’t be a problem.

  24. Guy Binet says:

    I cannot help but notice that both the forays into grocery stores and into the shipping business are entries into decidedly low margin enterprises. I think it may just boil down to a race between how flip (integrate) them into higher margins for the entire business and, failing that, some kind of exit strategy as they become an anchor to the higher margin business in it’s entirety. I’m betting that these moves will both prove to be horrible business decisions. It’s just a matter of time.

  25. char says:

    Ahold, which owns shop & stop, owns the largest supermarket-chain in Holland and bol.com, which is the Amazon of Holland. If the merger of an amazon and a supermarket was so brilliant they would have brought that concept to other markets were they have a strong supermarket precens . Ahold didn’t so i don’t think that there is that much synergy between an amazon and a supermarket.

    ps Amazon does not really operate in the Dutch market,they only sell ebooks

  26. safe as milk says:

    wf is the only full sized supermarket in my manhattan neighborhood so i’m there several times each week. the thing i notice about the amazon takeover is how hard they work at getting you to tie in your prime membership with each purchase via their app or by phone number. i do it to get my discount on apples. i suspect their rational is to add food shopping data to the detailed profiles amazon keeps on all of us. it’s only a small step from where we are now to philip k dick’s “minority report.”

  27. Marc D. says:

    I shop at Whole Foods occasionally, just for a few items, like some organic produce and a few pastries. Their baked goods are pretty good. I’ve noticed their prices don’t seem as high as they used to be.

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