Whole Foods chief John Mackey has finally lost control of his company, which he calls his “baby.” Friday, he sold it to Amazon for 25 percent less than its 2015 value. Irony is, Mackey could’ve avoided this outcome if he’d stuck to the principles of “conscious capitalism” he espouses.
For two years, investors have pressured Whole Foods. Last week, Mackey slammed a hedge fund for pushing him to sell, telling Texas Monthly that “greedy bastards” were “putting a bunch of propaganda out there.” He has a point: many investors want a short-term buck.
But he brought this on himself. His firm committed a common sin: over-expansion during the good times. In 2010, Whole Foods had 299 stores. By last year, it had 456. Demand, as measured by store traffic, has been falling since 2015.
Whole Foods faces tougher competition, too: online purveyors as well as Walmart and Kroger offering organic food. But Whole Foods’ biggest flaw – one that even agitated investors have missed – is that it stopped respecting its customers. The company can’t deal with busy stores or empty stores.
Take an example of the latter. The store on South Carolina’s Hilton Head Island is vast, shiny and relatively new. It’s also devoid of customers.
The store has dealt with this by taking away what its customers want: perishable food. One day in late May, its fish counter featured one sad cod slab and 12 shrimp. The shrimp were farmed, and from Vietnam.
The clerk duly tried to sell these shrimp – arguing that Whole Foods’ verification system ensured that the Asian shrimp are less polluted that Atlantic shrimp. But other issues aside, this argument doesn’t make sense in the Whole Foods world. The store was saying: Most of our stores have American shrimp, but it’s a good thing we don’t, because it’s polluted.
It also doesn’t make environmental sense to ship frozen shrimp across the planet when the Atlantic Ocean is a 15-minute walk away. So I went to Kroger across the street – which had five types of domestic wild shrimp, and where the clerk, unprompted, told me which one had come in off that day’s boats.
Another problem was apparent on other visits: unpredictability. Sometimes the store had American shrimp, sometimes they didn’t.
OK, so what about a successful Whole Foods – like Manhattan’s Columbus Circle? When the store opened in 2004, it became famous for its crowds and its lines. That was, it seemed, a good thing: People love the brand so much they’ll fight Penn Station-like hordes to stand in line for 15 minutes.
The crowds and lines still exist, sometimes. But the customers look more like they’re lamenting being stuck at a 1990s Kmart because of their own poor daily planning instead of happy to participate in an organic community.
Whole Foods’ aisles are too cluttered with marketing booths and stocking carts, making shopping there stressful. And the way the store manages its lines invites conflict.
People constantly get the numbered system wrong, and go to the wrong register, leaving everyone confused and annoyed.
Inconsistency abounds here, too: sometimes Whole Foods has a clerk to manage the lines, sometimes it doesn’t. Sometimes the store has every register manned and is looking vaguely concerned about its customers’ wait time, sometimes it doesn’t.
The same thing happens at busier stores’ meat and fish counters. The stores can’t manage customer flow, forcing customers into conflict with one another.
As for same-store sales: it can’t help the bottom line that when clerks can’t figure something out, they give up and give the item to the customer. This happens a lot – and with expensive stuff (thanks!).
To be fair, Whole Foods sometimes gets it right, as in Boston, Chicago and London. And – usually – the produce, meat and fish are still better than competitors’.
Mackey, who’ll continue to run the Amazon-owned firm, is one of those CEOs who isn’t satisfied with running a business. He’s out on book tours talking up “conscious leadership” and “value for all stakeholders” and such. But “conscious leadership” might involve incessantly walking your stores.
Published in Daily Times, June 26th, 2017.