Most unfortunate and interesting. The closest Whole Foods to RentHop HQ will be closing to public shoppers. Instead, it will “focus more on prime orders” during the Covid-19 shutdowns.
I’m sure Amazon has smart people who have crunched the numbers, but it seems almost unthinkable only months ago. One of the most central and prime real estate locations in Manhattan will turn away all foot traffic, instead becoming a logistics warehouse for their delivery services?
Why It Makes Sense
Anyone who has been to Whole Foods in the past 4 weeks knows it is a lot busier than in normal times. However, the slight surge is minuscule compared to record-breaking surges in delivery demand. FreshDirect has had no delivery slots most days for weeks, and that’s with many paying customers on Delivery Pass (obviously some get slots, but I’ve refreshed daily and now my subscription has expired, which I will not renew).
So what did the Operations Research geniuses at Amazon conclude? They can serve many more customers by increasing online delivery capacity. They are already near 100% capacity, and must have taken a careful look at the system bottlenecks.
Identifying Growth Bottlenecks
Part of the bottleneck is supply of goods – but even if they are out of Classico Basil and Tomato sauce, there is always someone willing to order Raos. Tech technology is also clearly not the bottleneck – they are already one of the world’s leading cloud providers, and despite the occasional bugs, their site can withstand a lot. It is possible they lack available staff to delivery the goods – but with 16 million newly unemployed, they should getting an influx of new applicants to join the ranks.
Removing Variation
Most likely, the bottleneck is preparing the orders and distributing them to the delivery staff. By converting centrally located stores into exclusive fulfillment hubs, they no longer need to dedicate much of the staff to the cash register, the food bars, and any of the stations that require customer interaction (“how many pounds of ground beef?” “do you want 85% lean or 90% lean?”). Most importantly, it’s about reducing variation. When they need to be ready for customers who might want or need anything, it doesn’t take much to slow down the capacity of the entire system.
Simplifying Product Lines For Higher Capacity
When they slice off the foot traffic arm of the business, what is left? All of the space and personnel can focus on only online orders. The orders are pre-determined AND pre-paid. They can revamp the logistics so orders are already pre-bundled and ready for pickup when the delivery person arrives. They are also no longer confined to working regular store hours. Deliveries and inventory can happen at all hours of the day.
Order packing is more complex – the deliveries can only go out at certain day hours (7am to 11pm), and some items are temperature sensitive down to about 2 hours prior to delivery. But at least they know about the complex orders with enough lead time and can plan for them in special ways.
Will I Order More?
Where does that leave us? Unfortunately, I doubt there will be priority slots for nearby residents and offices. Instead, they might add 1000 new delivery slots per day, but I’ll be fighting for them alongside the 20,000 others reloading their Amazon checkout carts!
