Why the Whole Foods Industry is Being Disrupted

  • 9 March 2017
  • Disruptor Daily

When you think of dinosaur-like markets ripe for disruption, Whole Foods might not be top-of-mind.

It wasn’t too terribly long ago that Whole Foods was the disruptor, but the tables have turned quickly. Now Whole Foods is the giant, with competitors as small as your neighborhood farmers’ market and as large as Amazon looking to pounce.

Shareholders clearly aren’t happy with Whole Foods. The company’s share price has dropped precipitously from $65.54 in October 2013 to less than $30 earlier this year. Whole Foods recently announced its sixth consecutive quarter of falling sales and has begun to shutter locations across the country.

The darling of organic food hasn’t shown its value in quite some time, leaving the door wide open for smarter competitors to own the space.

If this comes as a shock to you, you haven’t been paying attention.

The Amazon Effect

Whole Foods is not the first industry that Amazon has disrupted. Online ordering and delivery is becoming a staple of the industry, and one that no other company has mastered like Amazon.

Instead of taking time out of my day to head to a grocery store, I can shop digitally. This allows me to save time and compare prices without boring muzak blaring in my ear and a throng of shoppers all around me.

Through Amazon Fresh, I can order fresh food and have it delivered to me quickly. Amazon Fresh even has organic and gluten-free items — staples of the Whole Foods inventory.

If I’m running low on detergent or paper towels, I can just tap my Amazon Dash button and the problem is solved.

Can Whole Foods do this? Nope. I can order online for pickup at my local Whole Foods or have Instacart deliver it to me, but they don’t have a system anywhere near Amazon’s.

The scariest part for Whole Foods, and other big-box grocers? Amazon is opening up brick-and-mortar stores. The company plans to have as many as 2,000 physical locations (Amazon Go) in the next decade, with 20 coming by the end of 2018.

The first Amazon Go store is already open in Seattle, allowing customers to buy online and have a check-out free environment.

Everyone Else Went Organic

Whole Foods succeeded at first because it cornered the market on organic and fresh food. It used to be the only place to go for these kinds of products Now, even my local Walmart sells organic items. Odds are, you can go to your favorite grocery store to get healthy food previously only sold at specialty stores like Whole Foods.

According to the Organic Trade Association, mass-market retailers were responsible for 53.3 percent of organic food sales in 2015.

Natural and specialty retailers, such as Whole Foods, Sprouts and Fresh Market, were responsible for 37.3 percent.

It shouldn’t surprise you at this point that Sprouts and Fresh Market are also sputtering.

Whole Foods created an empire, but failed to protect it. Even bargain-basement big-box stores such as Walmart are moving in on Whole Foods’ territory. Walmart recently ended its relationship with organic food brand Wild Oats and is now offering organics under its own Great Value brand. Many Walmarts are opening all over the country with grocery sections, allowing budget-minded shoppers to do all of their bidding in one place.

As health-conscious Millennials drive the demand for organic products, retailers have stepped up to meet the need. Kroger has launched its own organic line and Aldi plans to have its own organic and gluten-free food on shelves soon. You can get organic food at Costco for a fraction of the price at Whole Foods, giving shoppers yet another option.

Whole Foods has responded to the rapidly-shifting grocery market, but it might be too little, too late. The company has opened a few “365” stores, with healthy products at a lower price point than available at Whole Foods stores. They’ve also started reducing prices, but it doesn’t appear to be enough to free them from this tailspin.

Let this be a lesson to the market titans of any industry: keep adapting. Your competitors aren’t sleeping.


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