Whole Foods begins charging vendors for store support

Whole Foods Market has begun charging suppliers for in-store services such as displays and demos, according to a report in the Washington Post.

In addition, the chain is requiring suppliers to work exclusively with Stamford, Conn.-based brokerage firm Daymon and its subsidiary, SAS Retail Services, for product demos, setting up displays and checking shelf conditions, the report said. Reports last year had indicated that Whole Foods was no longer working with local brokers.

Grocery suppliers will be required to reduce the prices they charge Whole Foods by 3% to fund the new program, while health and beauty suppliers will need to cut prices by 5%, the Washington Post reported. In addition, Whole Foods will charge local suppliers $110 for a four-hour product demo conducted by Daymon, and will charge national suppliers $165.

A spokesperson for Whole Foods was not immediately available for comment.

The article quoted Don Clark, Whole Foods’ general VP of purchasing for nonperishables, as saying that the changes “are creating a consistent, high-quality experience that benefits both our suppliers and our customers.”

The changes will likely pressure small suppliers, as well as local product-demo firms, the Washington Post article said.

“It should be noted that these changes could boost margins and lead to more consistency, but we believe there is a risk that the changes could stifle the entry of new brands into stores — something that makes Whole Foods unique and is important to many customers,” Karen Short, an analyst at Barclays Capital, wrote in a report on Tuesday.

Whole Foods had already been implementing strategies around centralization and efficiency before its acquisition by Amazon last year, and it’s not clear how the recent program changes have been influenced by the chain’s new owner.