Whole Foods Market has convened a meeting later this month with many of its vendors to address concerns over recent operational changes. Whole Foods has transitioned to more centralized buyers and has instated new merchandising fees, both of which have distanced some suppliers from the chain.
The centralized buying scheme, announced in May of last year, predates the Amazon acquisition of Whole Foods and marks a major departure from past practices of allowing individual local stores relative autonomy when it comes to sourcing and ordering. At the time, industry experts noted that this would likely make it harder for smaller local brands, which had previously been championed by the chain.
The merchandising fees, which were first reported by the Washington Post in early January, constitute a newer change instated since Amazon's acquisition of the chain and are part of a new in-store merchandising system. While formerly, food companies could pay outside brokers to help manage their product displays and stock, Whole Foods now wants to control this process, and brands selling more than $300,000 worth of products annually through the retailer will be required to discount their products between 3 and 5 percent to help pay for the new system. Brands will also be required to schedule and pay for in-store demos and inventory checks through the new system, both of which were previously free.
Some suppliers find the fees exorbitant and even prohibitive. They also take issue with the chain’s lack of communication regarding these changes, reports CNBC, which notes that sources say that their reliance on Whole Foods leaves them with “little power with which to bargain.”
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Whole Foods hasn’t disclosed the reason for the changes, but CNBC speculates that they may have to do, at least in part, with protecting in-store data.
“Brokers represent multiple brands and work with multiple retailers,” reports the outlet. “Cutting them out of the process means Whole Foods limits the number of people that know what goes on in its stores and who can share that information with others. Whole Food's parent, Amazon, of course, is a master — and fiercely protective of — its data management.”
“This meeting could go a long way towards clearing up this confusion, and seems to show that Whole Foods and Amazon want to keep manufacturers happy,” reports Food Dive.
Before Amazon's acquisition of Whole Foods Market, the chain's same-store sales had been falling for eight consecutive quarters; after the acquisition, the chain reported a 4.4 percent increase in sales from a year prior.
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