A new "order to shelf" inventory system is leading to empty shelves and low morale at several Whole Foods stores nationwide, employees told Business Insider. The new system, which predates Amazon’s acquisition of the grocery chain last August, is a strict regimen for purchasing, storing and displaying products, according to the report.
The grocer has instituted a scorecard system to ensure that employees are following the new procedures, Business Insider said, but some employees reportedly described the system as "stress-inducing." Executives last year told analysts the system would reduce out-of-stocks, more efficiently move product to store and improve operating practices in stores, according to a conference call transcript from Seeking Alpha.
Neither Amazon nor Whole Foods immediately returned Retail Dive’s requests for comment, but David Lannon, Whole Foods EVP of operations, said in May that employees were "really excited" about the new system. "They're really proud when they're able to achieve … lower out-of-stocks, less inventory in the store, being able to be on the sales floor talking to customers and selling more products," he said, according to Seeking Alpha’s transcript.
The troubles erupting at Whole Foods underscore how much of a learning curve Amazon has when it comes to brick-and-mortar operations in general — and grocery in particular.
The e-commerce giant is by now a veteran in other sectors — consumer goods and other retail categories, plus cloud services, shipping and advertising — with just two big-time spending areas left: grocery and healthcare. "They look at big pockets of spending — where you spend most of your money," Matt Sargent, senior vice president of retail for consulting firm Magid, told Retail Dive in an interview. (The company announced earlier this week that it's ready to tackle healthcare, too.)
The company has tackled grocery in a major way with its summer takeover of Whole Foods — but it's a newbie.
"Amazon is learning how to be a physical retailer," Forrester analyst Brendan Witcher told Retail Dive in an interview. "They’re going to have to go through that pain of finding out what does it mean to be a physical retailer. Walmart and Amazon are the flip sides of each other — Walmart’s needed to learn to be good at e-commerce."
Whole Foods employees apparently hope Amazon can learn fast — many told Business Insider that they expect the e-commerce giant to step in and make improvements. But Amazon’s priority may not be with workers, considering its own reputation for sometimes low morale at its warehouses and its corporate operations.