Yahoo Finance From 'Whole Paycheck' To Whole New Strategy: Whole Foods Founder Hails Bezos As 'Retail Genius'
Whole Foods founder John Mackey has praised Amazon founder Jeff Bezos for his strategy, making the supermarket chain even more successful. He has also called him a "retail genius." Here's what went down.
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Before Bezos and Amazon acquired the business in 2017, the supermarket chain Whole Foods was battling financially. With the rise of competition, it was becoming more difficult for the company to compete at a profit. Whole Foods was founded in 1980 by John Mackey with a small staff of 19 employees. Whole Foods revolutionized the grocery industry by offering consumers organic and natural food. The chain was well-known for its high prices, and despite Mackey's best efforts, the issues with affordability and increased competition meant that in 2006 Whole Foods' stock dropped by almost 40%. With the rise of grocery chains like Safeway and Kroger stocking organic food at much cheaper prices, Whole Foods was in trouble. Investors were pulling out and selling stocks and the management of the business saw several changes in new board members.
According to Jon Springer, an editor from the trade publication Winsight Grocery Business, the problem with Whole Foods was that "Consumers no longer had to go to Whole Foods to get what you could find in Whole Foods." Amazon's purchase of the organic grocery chain was Whole Foods' saving grace, as Mackey has expressed.
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Amazon bought the supermarket chain in 2017 for a staggering $13.7 billion, marking the online e-commerce giant's entrance into the grocery industry. At the time, many people were worried about what this meant for other supermarket chains. Springer revealed that the sale of Whole Foods felt like a blow to the industry. "Stock of all the conventional supermarkets and the Walmarts of the world just got devastated by this one announcement."
This acquisition also brought some positive changes for the business. Mackey has admitted that it's only thanks to Bezos that Whole Foods' prices have become more accessible to consumers. In an interview with Fortune, Mackey revealed, "Amazon let us drop our prices four times." Mackey added, "Jeff's a brilliant man; he’s a genius. What I like about Jeff the most, besides he's creative and entrepreneurial, is he thinks really long term."
This move to cut Whole Foods' prices could not have come at a better time, considering the country is battling high inflation, pushing food prices up by 21% since January 2021.
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In addition to helping the business attract more consumers who are shopping on a budget, Bezos gave employees a pay rise and helped shed the supermarket chain's reputation for being a "whole check" store due to its previous high prices. Mackey explains gratefully, "I hardly ever hear the ‘whole paycheck' narrative any longer — that's due to Amazon."
Amazon did this by slashing prices, which hurt revenue in the short term but has paid off in the long run. By offering savings to Prime members and hosting Prime Day discounts, consumers could save up to 50% on certain items.
Despite all the changes the e-commerce giant has made, including a new CEO, Jason Buechel, Mackey has emphasized that Amazon never tried to force its culture on the supermarket chain. "They didn’t try to change Whole Foods" despite this being common in the business world. Amazon still has bigger plans for Whole Foods, as Buechel revealed at a Milken Institute Global Conference in May that they plan to open around 30 stores a year and have already opened 60 new locations.
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