What Amazon's Acquisition of Whole Foods Means for the Labor Market of Supermarkets
Amazon’s acquisition of Whole Foods may not necessarily have an immediate impact on the labor market, but the effects could be noticed over time as a very innovative company such as Amazon enters the historically slow-to-innovate grocery industry. Amazon has already put the industry on notice by piloting “un-manned” stores.
Coupled with a decline in brick-and-mortar sales, as more e-commerce companies surface in the food industry, many traditional grocery retailers will need to evaluate their value proposition to consumers. Where will they differentiate and give customers a reason to shop in their stores? Convenience, customer service, and a focus on fresh foods/compelling merchandising are three main components that many successful brick and mortar companies use to attract and keep customers.
In order to successfully execute in these three areas, a well-trained and highly skilled workforce is required. Perishable departments such as meat, deli, bakery, foodservice, and produce require a greater attention to detail and greater creativity than something like the cereal aisle would. Stores that excel at offering a strong prepared foods section have better sales. Many chains with a strong in-store demo or product sampling program also see an increase in customer traffic. A well-developed foodservice or demo program cannot be executed at the store level without well-trained associates that know how to prepare and merchandise the products appropriately. Having a knowledgeable employee that can advise a customer on the proper wine pairing for the gourmet cheese they are purchasing or inform a customer of the health benefits of the latest herbal tea can make it worth the consumer’s time to drive the extra five miles to a store.
In purchasing Whole Foods, Amazon will have the brick and mortar network of stores they have been seeking. Whole Foods also has a highly skilled workforce that Amazon will be able to leverage for strong store-level sales execution. As Amazon’s innovative ideas are implemented at the store level, I would expect to see a more streamlined workforce within Whole Foods stores. There very well might be a day where a customer walks into a Whole Foods store and walks out with their groceries without a stop (or a wait) at a cash register. As the network of stores provides a closer endpoint to the consumer for Amazon, I would also expect to see new roles added at Whole Foods as employees deliver product directly to customers. For example, Wal-Mart is currently piloting a program in some areas where employees can earn extra money by delivering orders to customers on their commute home. Perhaps Whole Foods’ employee base will be leveraged by Amazon similarly.
Given the low profit margins in the grocery industry, expect to see other grocery chains continue to streamline their in-store personnel and better leverage skilled employees. This is something that impacts both union and non-union organizations. Unions have long been woven into the fabric of the grocery industry, but many have fallen by the wayside over the years as many long-standing chains have disappeared (A&P for one) and newer chains have emerged. How employees are treated and rewarded for the work they do will dictate the proliferation of unions throughout the industry. During the “great recession,” many grocery chains were forced to streamline their workforce. This again happened with the implementation of the American Healthcare Act. I suspect the ripple effects of Amazon steamrolling into the industry may force further reductions in the workforce. If companies continually pile more responsibility and expectations on their employees without proper reward, it could very well give rise to an increase in unionization.
Contact Brett Myers at bcm@tcgrecruit.com or 717-207-8786.