Many suppliers will see an increase from the average $25,000 “slotting fee” companies were paying to be featured in the stores’ most-visible, high-traffic areas. Additionally, Whole Foods is pitching its biggest suppliers on a promotion costing up to $300,000 for several weeks of prime shelf space along with souped-up marketing. The chain also is asking suppliers to offer bigger discounts on their products to earn the space. A high-visibility nationwide promotion at Whole Foods now often requires companies to cut product prices by at least 25%. “We knew full-well that there would be discontent,” said Whole Foods’ V.P.
The firm is adopting a suite of retailing tactics meant to enhance profitability, including centralized purchasing decisions, tighter control over inventory and working with a national contractor to do in-store sampling. Grocery suppliers will pay a fee of 3% of the cost of goods delivered, and beauty suppliers will pay 5%. Whole Foods has hired an outside company to stock shelves “to provide a much more effective result.”
On the other hand, Kroger, the largest U.S. supermarket chain, has been courting niche brands over the past year with a new portal for local suppliers and a series of natural-foods trade fairs. The company doesn’t charge slotting fees for small suppliers.
(See our discussion of slotting fees in Chapter 9 on pages 374 and 392.)
Classroom discussion questions:
- Discuss the ethics of charging fees to allow products to be placed on supermarket shelves.
- Why is this an issue particularly in the grocery industry?