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Why Whole Foods’ Better Backend Is Really About Strengthening The Storefront Experience

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Whole Foods announced this week that it will be pairing up with Infor to completely redesign and upgrade its ERP systems — a move that is actually a whole lot bigger than making sure its backend runs better. It’s using its logistics system to better drive customer engagement by giving consumers a window into just how fresh, local and organic their groceries really are — all in real time. We have the scoop on how they’re doing it, and why using the backend organization to drive the front-end experience may be the shape of things to come in retail.

Outside of UPS Commercials, the subject of logistics tends to inspire little in the way of enthusiasm. Which isn’t to say they aren’t important, they just aren’t natively interesting to anyone outside of those managing them directly. Generally speaking, if a consumer finds himself or herself  hyper-aware of a retailer’s logistical systems, the odds are good that the news is bad and that something had gone wrong with them.

But in the digital age, some retailers are wondering if the data in the backend might just be key to closing some sales in the storefront.

Which is why the Whole Foods announcement yesterday that is it partnering with Infor to overhaul its ERP systems is interesting.

On one level, it is an impressive technical commitment and something of a corporate leap of faith. Infor is the third-largest enterprise software firm in its sector (following German-based SAP and California-based Oracle), and its stated goal in its new partnership is to use Whole Foods as a test lab for the development of a new platform for cloud-based retail software that could eventually be used by other companies.

Being a test lab for anything requires some bravery — and it might lead one to wonder: Why is Whole Foods being so brave?

And it seems the answer there is that Whole Foods’ push for a fully integrated ERP system is about more than a much-needed backend update; it is also about the reinvention of the Whole Foods brand that has been underway all year.

Because while organic grocery is very much the house that Whole Foods built, they are no longer the only big name in the game. But they maintain that they remain the best — and they are making a big bet that a major upgrade in their data analytics and supply chain management is actually key to competing in the much more crowded landscape their success created.

“The word on the street is everyone is selling the same food. Well, they ain’t,” Whole Foods co-CEO Walter Robb told Fortune. “I know there’s a difference. I want to communicate the difference and sell the difference, and we’re partnering with technology to do it.”

So how do you sell in the storefront the big improvements made on the backend — and what does that have to do with reinventing the organic grocery market?

Glad you asked.

Better Backend, Better Business

While something of a niche market a decade ago, a preference for organic/local/artisanal has evolved right into the consciousness of middle-class shopper — and a lot of that change in consciousness can be attributed to the very rapid expansion of Whole Foods nationwide.

Success breeds imitators, and the customer on the hunt for purer produce can choose between Whole Foods and other speciality grocers likes Trader Joe’s, or bulk discounters like Costco and Sam’s, or mainstream mid-market grocery players like Stop & Shop, or (in some areas) organic delivery startups like GrubMarket. Whole Foods’ main differentiator of the past — the quality of its goods — is no longer so different.

That had left consumers and industry watchers focused on and talking about Whole Foods’ other distinguishing feature, its higher than average prices (Whole Paycheck anyone?). And then the stories started to emerge that Whole Foods was upcharging in some New York City stores and putting sprigs of asparagus into bottles of water and marketing it as a $6 artisanal beverage. By the end of the summer of 2015, some began questioning if Whole Foods had transcended mere price padding and had actually moved to actively trolling its customers with its pricing structure.

And while at the time many dismissed Whole Foods’ apologies and explanations that both issues had been predicated on errors as a rather weak excuse when caught red-handed, it turns out Whole Foods might have been being somewhat honest.

Because apart from breeding a legion of competitors for themselves, Whole Foods’ rapid expansion over the last decade also left the organic grocery pioneer with a backend that was “somewhat scattershot until now,” by even their own description.

Currently there are 12 separate instances of a homegrown ERP system running across Whole Foods’ 431 stores; the Infor partnership will combine them into one, single cloud-based system.

“Because Whole Foods’ early focus was on growth and developing a strong regional presence across the United States in a diverse series of markets, the system has gotten too fragmented to run efficiently, because too much data isn’t transparent across the system,” a Whole Foods spokesperson noted. “By partnering with Infor, we will be able to get a single view of all of our data for the first time ever.”

And with that more centralized data infrastructure, paired with better analytics, Whole Foods anticipates it will be able to manage and predict inventory more accurately — and use its retail locations more effectively.

“Knowing how products are performing  across the entire organization will allow Whole Foods to both drive business day-to-day, provide a more relevant experience for our customers and provide more efficient pricing structures as a result,” the spokesperson added.

A better view into the backend could also eliminate the need from some inefficiencies that are currently just baked into Whole Foods’ fragmented and decentralized system. For example, today, store workers scan shelves and manually mark items that need restocking. Under the new system, that process can be automated and better tailored based on analytics data. Most importantly, the data will be networked across Whole Foods’ 431 locations so that chain-wide performance will be transparent.

“The new platform will leverage a series of Infor products and use cloudstack based in Amazon Web Services that will facilitate greater use of open source software,” the spokesperson said.

But Why Would A Customer Care?

Given the current state of Whole Foods’ backend, an upgrade to its ERP systems is certainly advisable.

Moreover, this move fits into Whole Foods’ stated new direction toward a more technologically enhanced brand. The chain was one of the initial merchants to sign on to accept Apple Pay this time last year. Around the same time, they also inked a deal with Instacart to pilot a home delivery program for Whole Foods items. The chain is also overhauling its POS and common commerce platform. Currently, Whole Foods works in tandem with four separate point-of-sale suppliers. That will now change over to a single platform, called OnePOS.

These upgrades will not come cheap to Whole Foods. While the chain declined to disclose the total estimated costs for the Infor project (or the cost of its total tech upgraded in general), last month Whole Foods announced plans to cut 1,500 jobs as it looks upgrade technology (and lower prices).

And while these things would in any case hopefully create a better and smoother consumer experience at Whole Foods, they wouldn’t in the past necessarily have been anything a customer would care about, because backend systems by design are invisible.

Or at least these used to be, but Whole Foods’ backend update has an interesting twist — part of it is bent on getting some of the sweet, sweet supply chain data into the hands of the customer. Because in organic food, their spokesperson noted, information about origins is created equal.

“Not all organic food is created equal – in fact not everything sold labeled ‘organic’ is organic – or organic to the Whole Foods standard,” the spokesperson noted. “The overall goal of this project is that consumers – with a smartphone and SKU, or even using their camera as a scanner, will be able to take items from the shelf and know that item’s history.”

That could well entail putting many different types of information into the hands of a consumer. It might mean knowing exactly where and when one’s vegetables were harvested, or just how “local” that locally handcrafted artisanal cheese really is, or making sure that the “gluten-free” cereal was made in a factory that was also gluten-free.

Whole Foods is betting that customers who buy organic food or locally sourced food want what they buy to actually be both of those things, not just labeled that way. They are further betting that if they can prove that, in real time, to any customer standing in a store with a smartphone, they have much better odds of closing a sale.

Because while fixing their backend will allow Whole Foods to communicate better with itself ( something it has had some trouble doing in the past), it might also allow them to do something that everyone who is getting into grocery is trying to crack, which is communicating better with the customer. It’s a tall order — and, given the state of things today, it will require a very successful implementation with Infor. But if Whole Foods can do it — and can raise the level of the organic grocery game to merchants having to prove in real time their food’s organic bona fides, that might just change the face of how people shop for food — again.

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