The independent and up-and-coming brands that were once a hallmark of Whole Foods Markets’ success – particularly during the early days when it was still a privately-owned brand based in Austin, Texas – are on the verge of a revolt against the store now that it’s under new management as Amazon tries to squeeze every last penny out of one of its most high-profile investments.
Several small brands complained to Business Insider that WFM recently hiked the fees its vendors are expected to pay, making them responsible for more of the costs of shipping and stocking their products. The company has also started instituting higher fees for prime shelf space, as well as additional fees if smaller brands want to hold product demonstrations in Whole Foods’ stores.
It’s also forcing smaller brands to pay additional fees to a small, Connecticut-based “retail consulting” shop while also dropping “minimum shipment” guidelines that helped stores experiment with small batches of new products.
The hostility of the brand’s new corporate overlords has made some smaller sellers nostalgic for the good ol’ days when WFM was still an innovator in the world of independent food brands and locally sourced products…
“I once drove to every Whole Foods store in the Portland area and dropped off jars of our nut butters” for stores to sell, said the founder of a brand of natural nut butter. “That’s over, that’s done. That’s not ever happening again.”
Another vendor intimated that their brand is on the verge of pulling out of WFM because, with the added fees, the company is now losing money on some of its shipments…
“They have pissed off their employees, they have pissed off customers, and they have pissed off their vendors,” said a Whole Foods vendor of eight years who asked to remain anonymous for fear of retribution. “From a financial perspective, we can only take so much abuse before we say this just isn’t working for us anymore.”
And while the company didn’t officially comment, it’s likely that these higher fees are meant to offset massive price cuts that Amazon instituted almost immediately after taking over WFM…because even Amazon shareholders can only tolerate massive losses for so long…
But the irony is, by squeezing small brands past their breaking points, Amazon risks destroying the one competitive advantage that helped bring WFM to national prominence: It’s offerings of local and independent brands. In the old days, store managers were famously given autonomy to strike deals with small producers. Now, most product decisions have been centralized at WFM’s headquarters in Austin.
Of course, Daymon, the consulting firm that WFM now employs, says WFM is just trying to equitably distribute its cost burden…by making it impossible for small brands to compete with faux-indie labels like Annie’s Homegrown, which is of course owned by General Mills.
Jim Holbrook, the CEO of Daymon, the consulting firm working for Whole Foods, said local products were still vital to Whole Foods’ business model. The grocer, he said, is just charging them for the labor it costs to move products around during demonstrations.
“There’s no move to keep those vendors out of the stores,” he said.
It’s also worth noting that most of these policy changes were implemented before the Amazon takeover, when the former retail darling was still a stock-market dog whose future as a public company was very much in doubt. Whole Foods stopped covering shipping fees and dropped minimum-shipment requirements in March 2016 for vitamins, supplements, and beauty products…
…Then, about a year later, WFM started rolling out an order-to-shelf inventory-management system that cut back drastically on storage. As a result, stores started making smaller, more frequent orders, making it too expensive for smaller vendors. Some vendors also complained that the store blindsided them last year by inviting them to a conference in Oregon and then announcing that they would all need to start paying fees to two outside companies: UL Everclean and IX-One. UL Everclean is a food-safety auditor, and IX-One takes photographs of suppliers’ products. Both charge ongoing fees.
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While some suppliers are considering pulling their goods from WFM as a result of the changes, others are terrified of being cut from store shelves and being replaced by larger brands.
“A lot of the vendors are refiguring their game plans with Whole Foods,” a broker who represents more than a dozen suppliers said. “At one time it was considered a reciprocal relationship. Those days are over. There is no feeling that Whole Foods cares anymore.”
Uh, caring for vendors?
Somebody needs to tell these people that there’s no money in Bezos’ world domination and monopolization budget for that.