Barclays analysts reported finding "entirely empty" shelves and deteriorating produce at two Whole Foods Market stores last week, one in the Midwest and one on the East Coast, according to Business Insider. In a note to investors, they noted out-of-stock issues "in every department of one Midwest store across both private-label items and branded items," Business Insider reported.
These problems could be due to high numbers of customers, the analysts noted. "This is a high class problem if in fact sales have really accelerated — but is also an execution issue resulting in lost sales," they wrote.
Barclays analysts reported other problems during a November 20 visit to several Whole Foods in the northeast U.S. These issues involved boxes thrown around the store, inoperable scanners, long lines and understaffed service counters. At that time, they said weren't sure whether the problems stemmed from high seasonal sales response or from labor reductions. In response, Whole Foods said nothing had changed operationally or with its produce quality standards that would account for a decline in quality.
Business Insider reported that one worker at a Texas Whole Foods store, who requested anonymity, said out-of-stock issues were "horrible" during holidays and that the produce department "looked embarrassing." And a customer in New York City told the publication he had observed "severe inventory problems" at the Whole Foods store he frequents.
Another customer, Janet Wagner of Santa Monica, California, told Business Insider she would no longer patronize Whole Foods after shopping there twice a week for years.
“It has been very disappointing to witness the decline of the Whole Foods shopping experience since the Amazon acquisition,” Wagner said. “The market has a totally different vibe. Besides the diminished quality of fruits and vegetables, lots of items are out of stock.”
Investment bank analysts finding objectionable conditions during random store visits is one thing, but the fact that a variety of customers and employees have reported similar problems complicates the situation. It also raises the question of how many of these quality changes relate to Amazon's $13.7 billion purchase of the retail chain last August.
Amazon wants shoppers to see both it and Whole Foods as sharing a commitment to quality products, low prices and innovation. Yet news reports like these threaten to drive a wedge between quality-focused Whole Foods and efficiency-at-all-costs Amazon.
It's not clear exactly what is at the root of the problem. What can be said with certainty, though, is that Amazon is streamlining Whole Foods’ buying operations. To many customers and industry observers, this represents a troubling “mainstreaming” of a company known for high-quality, hard-to-find niche and local products. Sources have told news outlets — Food Dive among them — that Whole Foods has cut ties with many small brands. Barclays analysts, who regularly visit Whole Foods locations and report on their observations, have reported that stores are emphasizing conventional products in their merchandising.
Given today's highly competitive grocery industry — with retail chains continually diversifying their offerings, adjusting prices and jockeying for customers — it's especially unwise to alienate customers with missing products, poor-quality produce, check-out problems and aisles in disarray. Even dedicated Whole Foods fans have their limits, and brand loyalty and general goodwill can be lost much more quickly than it's gained.