Whole Foods Market's Technology Glitches Slow Down Rollout of Amazon Prime Benefits

Whole Foods Market ended its rewards program on May 2, leaving Whole Foods shoppers and Amazon Prime members wondering what new benefits the grocer would rollout. Amazon CEO Jeff Bezos noted in his annual shareholder letter that Amazon has started "the technical work needed to recognize Prime members at the point of sale" and looks forward to "offering more Prime benefits to Whole Foods shoppers once that work is completed." 

Now the retailer has announced Prime members will get an additional 10% off sale items, as well as weekly deep discounts on select best-selling items. Prime member deals will be prominently featured in-store and shoppers can use the Whole Foods Market mobile app to learn about the best offers each week. Deep discounts include, for example (in Florida May 16 through May 22), 10$ per pound off wild-caught halibut steaks, half off a 16 oz. cold brew coffee at Allegro coffee bars, and buy-one-get-one free on a 12-pack case of store brand water.

The new benefits are currently available in all stores across Florida and will expand to all Whole Foods Market and Whole Foods Market 365 stores nationwide starting this summer.

So what's taking so long for the rollout?

From documents, emails, and discussions with sources familiar with the matter, Business Insider reports the technology that powers Whole Foods stores is repeatedly crashing. Whole Foods' information-technology systems, which include its registers and scanners, are plagued by problems, according to BI's source.

Whole Foods' IT problems within the past month include registers failing to apply sales taxes at checkout, issues with accepting credit cards and with store balance updates, and a total loss of connectivity between Whole Foods' stores and its global headquarters in Austin, according to internal emails reviewed by Business Insider.

Later this month, Whole Foods stores will start using Amazon's systems, instead of Whole Foods' POS systems, to process orders for Prime Now, the grocery-delivery service for Amazon Prime customers, according to an internal memo reviewed by Business Insider.

This isn't the first time there have been reports of failing technology at Whole Foods.

In January, Business Insider reported food shortages in stores were leading to empty shelves and angry customers were caused by the grocer's newly implemented inventory management system called order-to-shelf (OTS).

The order-to-shelf project was led by Bart Beilman, global V.P., supply chain & retail operations, and was supposed to transform inventory levels in the back room, essentially clearing them out of inventory that's not necessary. The OTS project involved some products being moved directly from the loading dock to store shelves. It was meant to help WFM cut costs, better manage inventory, and reduce waste.

A year before, RIS reported that David Lannon, EVP of Operations, said in the stores with order-to-shelf, WFM is looking at some very empty back room spaces. The project was implemented well before Amazon purchased Whole Foods.

Amazon vs. Whole Foods

In a new case study from Harvard Business School professors Dennis Campbell and Tatiana Sandino, "Whole Foods Under Amazon," the pair discusses the limits of trying to force one culture or management style on another organization.

"From the very start, Amazon made its name on being fast, cheap, and efficient—using data to drive its product mix and enforcing strict employee discipline to squeeze out cost savings to pass on to its customers," Michael Blanding writes of the study.

"Whole Foods, on the other hand, always prided itself on its personal touch, empowering individual stores—even individual employees—to make decisions about products that emphasize high quality, healthy, and local foods. That decentralization, however, caused enormous inefficiencies that drove up prices to the point where critics referred to the store as 'Whole Paycheck.'"

He writes that Campbell and Sandino were surprised to learn that the new inventory system was actually something Whole Foods had started to implement before the Amazon deal, pressured by activist shareholders who had seen the grocer’s stock and sales margins slipping for two years.

“This is not a story where there is a good guy and a bad guy,” said Campbell. “It’s a story about what the limits are to scaling this high-empowerment model, and what are the limits to a model where it’s all about standardization and data.”

“Instead of this assumption that data should take over everything,” Campbell says, “there is a huge opportunity here for data to inform and complement human judgment.”

You can read the full Whole Foods Amazon case study findings here.