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Whole Foods looks to tech to help with the bottom line

Ashley Milne-Tyte Jan 4, 2016

Whole Foods looks to tech to help with the bottom line

Ashley Milne-Tyte Jan 4, 2016

Last year was a tough one for Whole Foods. In 2015, sales were down as cheaper retailers like Costo and Wal-Mart muscle into the organics space. A pricing scandal hurt its reputation. And its stock price fell. Whole Foods said it’s in the process of getting back on top — lowering prices, doing more marketing — and finally, improving customers’ experience through technology.

At a Whole Foods in downtown Manhattan you think more about human help than the technological kind. I stopped by with J.P. Eggers, a professor of management at NYU’s Stern School of Business. We were only inside a moment before we spotted eight employees, and their handiwork showed too. We made our way to the colorful salad bar, and instead of sloppy overflow, there wasn’t a beet out of place. Eggers said if this were a salad bar in another supermarket, “it would probably by the end of the day be a complete mess.” But at Whole Foods, a member of staff regularly comes by to keep things looking neat. 

Eggers said it’s this kind of attention to detail that makes Whole Foods stand out from its cheaper competitors.

“The whole idea is this emotional connection they build between you and the store that makes you feel guilty if you go somewhere else,” he said. “That makes you desire to go back, and makes you feel happy when you’re there.”

Whole Foods wants to build on that connection. It hopes technology will deepen its relationship with customers. Jason Buechel is the company’s chief information officer. He said the company is undergoing a technology overhaul, from the systems staff use behind the scenes to the way the retailer runs its supply chain.

To take one example, Whole Foods is revamping its outdated point-of-sale system so customers can check out faster and take more advantage of things like coupons. It’s also experimenting with a self-service kiosk in some stores, so you can use an iPad to order your sandwich and customize it just how you like. There’s some evidence that people order more when they serve themselves, and in fact that’s what happens when Whole Foods customers order groceries online using Instacart.

 “We’ve actually found that our basket is actually significantly higher for Instacart orders than what it is in the store,” Buechel said.

With the kiosk, he said it’s too early to tell if people are digitally pigging out. Still, he added, ordering this way lets people do other shopping while they wait. So it keeps customers around who might otherwise give up during the lunch rush.

Buechel said the kiosk isn’t replacing staff – at least not yet. There’s still someone nearby if a customer needs help.

Brian Yarbrough is a research analyst with Edward Jones. He said the technology upgrades will definitely make the stores run more efficiently. Still, Whole Foods has also said it will cut costs – without being that specific. And that worries Yarbrough.

“I do have a little concern if it comes out of a customer-facing environment, so basically in the store,” he said. “If you start taking labor out, that can have a big impact, and especially at a retailer like Whole Foods that is so customer-service-focused.”

It’s the staff who have kept Diana Coatney coming back to her local Whole Foods. She lives in Capitola, California. She has young twins who used to go shopping with her all the time. Then the family moved away for a year. After they moved back she returned to Whole Foods, and a staff member there surprised her.

“Somebody that I didn’t recognize but recognized me and the kids referred to them by name the first time I went back into the store,” she said. “And I didn’t recognize this staff person. So I’d been gone for a year and they still knew my kids’ names.”

She said no technology can replace that kind of human touch.

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