Imagine a grocery store where you can receive personal recommendations and offers the moment you step in the store, where checkout takes seconds and you can pay for groceries without ever taking out your wallet. Sound far-fetched? It’s closer than you think. -Nielsen “The Future of Grocery”
An Old Natural Market Looking to Innovate
Whole Foods was started in 1978 by two college drop-outs who wanted to sell natural foods to their classmates. Set up in their dorm room, the original Whole Foods utilized very little technology. Eventually, the duo bought a real store, expanded, and marched their way across the nation. As a wave of demand for organic and natural food products swept over the United States, Whole Foods captured a large percentage of those customers.
The original store. Source: Whole Foods Website
Now in the 21st century with over 400 stores, Whole Foods has become not only a natural foods market, but an innovative grocer and food delivery service. In the company’s core values, they state that Whole Foods, “continually experiments and innovates.” True to that mission, the company has taken several steps in recent years to take advantage of emerging technology. Operating within an evolving landscape of startup competitors, the company must continue to incorporate new digital solutions in the years to come.
Digitizing the Operating Model – Cost Reduction through Tech-Enabled Information Systems
In 2013, Whole Foods announced a partnership with Infor, a technology vendor more known for industrial automation software at the time. With the partnership, Whole Foods took a smart approach to solving a long-term problem: organic food remained much more expensive than non-organic options. To expand their market, Whole Foods needed to reduce their costs and maintain competitive prices. To do so, Whole Foods partnered with Infor to automate its merchandising, supply chain, and inventory systems. While implementation continues, in 2016 the Wall Street Journal reported that the Infor partnership was enabling Whole Foods to reduce its inventory management systems from twelve to one. All of its cost savings measures combined, Whole Foods was well on its way to reducing costs by $300M by 2017.
Digitizing the Business Model – Bringing Food Shopping Online
Beyond enhancements to its operations, Whole Foods also used technology to respond to adapting consumer preferences. As these customers began to shop more online, the company started to offer online purchasing and delivery. In 2014, Whole Foods announced a partnership with delivery startup, Instacart. The partnership would allow customers to have Whole Foods products delivered within 1 hour. This digital platform and physical delivery system enhanced convenience for customers, addressing the 2nd most important concern (only second to price) amongst grocery shoppers in North America. This move was also defensive, in part thwarting off the arrival of online-online grocery threats, like Amazon Fresh. After their first Instacart pilot in 2014, Whole Foods scaled online delivery to 60 stores in 16 cities in 2015.
Capturing the Ultimate Digital Customer – the Millennial Household
“Millennials are at the beginning of their careers and are starting to form households. This generation will shape our economy for
decades to come.”
To attract millennials, Whole Foods announced further digitization efforts in 2016 – opening smaller stores in more ‘hip’ locations and with more technological integration. Whole Foods is testing out ‘smart carts’ which help customers navigate through the grocery store maze. Additionally, to counteract stockouts arising from the smaller store size, these stores use electronic shelf scales that alert employees when a product is running low.
Next Steps and Recommendations
In addition to the initiatives the company has already undertaken, there are several tech-based opportunities Whole Foods could implement:
- In the store: To help customers buy more quickly, Whole Foods could turn to smartphone enabled self-checkout technology that’s already used in 10% of North American supermarkets to date. This would allow customers with their own bags to check out as they go, saving time in the process. Stop & Shop has found success with their trials which shows promise in user uptake.
- In the home: Whole foods could help households manage their pantries. With the advent of smart-refrigerators, customers are looking for services that take advantage of screens and food sensing capabilities. The move to smart devices in the home is nascent but the opportunity is real, as Houzz reports that 45% of renovations in 2016 incorporated some smart home technology. A partnership with device makers could help Whole Foods have a presence not just in customers’ minds but physically in their kitchens as well.
It is clear that Whole Foods must adopt technology to defend against competitors and to grow their customer base. Groceries will continue to play a critical role in consumers lives and technology can enhance many parts of that experience.