4 ms·

> It's fairly obvious that grocery stores would not want to be in poor neighborhoods. Why not, for us clueless people?

by drb91 8y ago

freehunter 8y ago
They answered that in their second sentence: why would they put a store in a community that can't afford to buy their products?
- deleted 8y ago
  [deleted]
HarryHirsch 8y ago
It's the low purchasing power of the customer base, and a higher proportion of theft, shrinkage and vandalism in poorer neighbourhoods eroding profits further. Profit margin on grocery items isn't high to begin with.
hajile 8y ago
Why are products more expensive in poor neighborhoods? If there were real profits to be reaped, certainly stores would be moving in and enjoying high profit margins rather than leaving. The answer should lie elsewhere and it does. Cost of doing business in those neighborhoods is very high. Vandalism and robbery jack up insurance rates. Companies don't want to deliver there because they don't want the risk, so they charge more. Shoplifting expenses must be spread across all product actually sold. If the place offers loans, they must deal with very high rates of defaults. You can't squeeze blood from a turnip. If someone doesn't pay for that car, you have to repo it, but there's a decent chance it can't be found or that you now own an unsellable car or that it was messed up, but there's no way of actually getting any money out of the responsible parties. Finally, let's say I put a store in a nicer part of town only 15 minutes away. I get less vandalism and basically zero robbery. I get less shoplifting and lower insurance rates. I can keep the same profit margins as the guy in the poor neighborhood and still offer significantly lower prices. Because it's reasonably close to the poor neighborhood, I even get their business without all the extra risk. In the loan market, less risky clients means I can charge less interest and still make the same amount of money and have far less overhead tracking down people and things. The real tragedy here is police. Poor neighborhoods and police don't get along. Police view everyone suspiciously (why wouldn't they when most dead and injured police show up in those same neighborhoods?). Likewise, the people living there don't trust the police because the police treat them as criminals (and like it or not, someone somewhere is always going to make a mistake that starts this downward spiral). This isn't even a race issue. Police and the poor have had this relationship going back as far as you can search no matter the race (or races) involved. This problem could be fixed with education, but the average criminal and average police officer both have below average IQs (with it being ruled in the US that it is perfectly legal to reject police officers who have an IQ that is "too high"). If everyone in a poor neighborhood were properly educated, it would cease to be a poor neighborhood in a very short amount of time, but our education system is only interested in lip service (another problem in itself).
- dclowd9901 8y ago
  “Cost of doing business in those neighborhoods is very high. Vandalism and robbery jack up insurance rates.“ Oof. I was with you til this. For a large grocery store chain, the occasional vandalism/shoplifting incident is nothing. Built into the price, as they say. The real reason they don’t operate in these areas is because a poor community spends less money than a rich community. If you have to stretch your floor space buck, you want to operate 1) in the market gap you work best in and 2) the area of best fit for that market. A Kroger, if you will, serves middle class America. Their stock, their prices, their marketing and everything else they do operates at that market. However you might see a Kroger operating in an area a bit beneath their target. You won’t ever, however, see a Whole Foods or Trader Joe’s anywhere near a poorer community. So Dollar General and the like are filling a previously neglected niche that used to be filled by small bodegas and mercados.
  - hakfoo 8y ago
    But that doesn't mean that a company with the resources of Kroger couldn't also manage a brand that aimed significantly lower. In Arizona, there's a local grocery chain (Bashas') that's been around since before WWII. They have three very distinct brands-- the mainstream brand, a decidedly lower-class brand with a string Hispanic focus, and a deluxe brand which seems to target a more foodie, but similarly affluent audience to Whole Foods.
    - azeotropic 8y ago
      Kroger Co. does manage several brands (including jewelry stores), but sold off their convenience store brands just this year.
    - UncleEntity 8y ago
      Bashas is now part of Albertsons which is one of the big grocery conglomerates in the US.
  - hajile 8y ago
    Compare prices between a Dollar General in a poor neighborhood and a walmart. One of those is going to be 30% higher (even more on some things). Supermarkets have a net profit of 1-2%. If walmart could charge 30% more for the same thing, they'd build in poor neighborhoods every time. They don't because the risk is too high when a store a couple minutes away offers lower overhead, lower prices and lower risk. Walmart tried this with walmart express then killed most of them off (keeping some larger neighborhood markets in better neighborhoods) because they weren't turning a profit. https://www.forbes.com/sites/greatspeculations/2016/01/22/walmart-kills-walmart-express-are-neighborhood-market-stores-more-productive/#22f03c3524c5 https://www.forbes.com/sites/greatspeculations/2016/01/22/wa... Companies like Whole Foods are not typical of grocery chains. They will go wherever their niche is located. That would be like complaining there aren't Swiss watch stores on every corner. There is something to be said for branding and location, but even Walmart with their "

> It's fairly obvious that grocery stores would not want to be in poor neighborhoods. Why not, for us clueless people?

by drb91 8y ago

> It's fairly obvious that grocery stores would not want to be in poor neighborhoods. Why not, for us clueless people?

They answered that in their second sentence: why would they put a store in a community that can't afford to buy their products?

deleted 8y ago
[deleted]

HarryHirsch 8y ago

It's the low purchasing power of the customer base, and a higher proportion of theft, shrinkage and vandalism in poorer neighbourhoods eroding profits further. Profit margin on grocery items isn't high to begin with.

hajile 8y ago

Why are products more expensive in poor neighborhoods? If there were real profits to be reaped, certainly stores would be moving in and enjoying high profit margins rather than leaving. The answer should lie elsewhere and it does. Cost of doing business in those neighborhoods is very high. Vandalism and robbery jack up insurance rates. Companies don't want to deliver there because they don't want the risk, so they charge more. Shoplifting expenses must be spread across all product actually sold. If the place offers loans, they must deal with very high rates of defaults. You can't squeeze blood from a turnip. If someone doesn't pay for that car, you have to repo it, but there's a decent chance it can't be found or that you now own an unsellable car or that it was messed up, but there's no way of actually getting any money out of the responsible parties. Finally, let's say I put a store in a nicer part of town only 15 minutes away. I get less vandalism and basically zero robbery. I get less shoplifting and lower insurance rates. I can keep the same profit margins as the guy in the poor neighborhood and still offer significantly lower prices. Because it's reasonably close to the poor neighborhood, I even get their business without all the extra risk. In the loan market, less risky clients means I can charge less interest and still make the same amount of money and have far less overhead tracking down people and things. The real tragedy here is police. Poor neighborhoods and police don't get along. Police view everyone suspiciously (why wouldn't they when most dead and injured police show up in those same neighborhoods?). Likewise, the people living there don't trust the police because the police treat them as criminals (and like it or not, someone somewhere is always going to make a mistake that starts this downward spiral). This isn't even a race issue. Police and the poor have had this relationship going back as far as you can search no matter the race (or races) involved. This problem could be fixed with education, but the average criminal and average police officer both have below average IQs (with it being ruled in the US that it is perfectly legal to reject police officers who have an IQ that is "too high"). If everyone in a poor neighborhood were properly educated, it would cease to be a poor neighborhood in a very short amount of time, but our education system is only interested in lip service (another problem in itself).

dclowd9901 8y ago
“Cost of doing business in those neighborhoods is very high. Vandalism and robbery jack up insurance rates.“ Oof. I was with you til this. For a large grocery store chain, the occasional vandalism/shoplifting incident is nothing. Built into the price, as they say. The real reason they don’t operate in these areas is because a poor community spends less money than a rich community. If you have to stretch your floor space buck, you want to operate 1) in the market gap you work best in and 2) the area of best fit for that market. A Kroger, if you will, serves middle class America. Their stock, their prices, their marketing and everything else they do operates at that market. However you might see a Kroger operating in an area a bit beneath their target. You won’t ever, however, see a Whole Foods or Trader Joe’s anywhere near a poorer community. So Dollar General and the like are filling a previously neglected niche that used to be filled by small bodegas and mercados.
- hakfoo 8y ago
  But that doesn't mean that a company with the resources of Kroger couldn't also manage a brand that aimed significantly lower. In Arizona, there's a local grocery chain (Bashas') that's been around since before WWII. They have three very distinct brands-- the mainstream brand, a decidedly lower-class brand with a string Hispanic focus, and a deluxe brand which seems to target a more foodie, but similarly affluent audience to Whole Foods.
  - azeotropic 8y ago
    Kroger Co. does manage several brands (including jewelry stores), but sold off their convenience store brands just this year.
  - UncleEntity 8y ago
    Bashas is now part of Albertsons which is one of the big grocery conglomerates in the US.
- hajile 8y ago
  Compare prices between a Dollar General in a poor neighborhood and a walmart. One of those is going to be 30% higher (even more on some things). Supermarkets have a net profit of 1-2%. If walmart could charge 30% more for the same thing, they'd build in poor neighborhoods every time. They don't because the risk is too high when a store a couple minutes away offers lower overhead, lower prices and lower risk. Walmart tried this with walmart express then killed most of them off (keeping some larger neighborhood markets in better neighborhoods) because they weren't turning a profit. https://www.forbes.com/sites/greatspeculations/2016/01/22/walmart-kills-walmart-express-are-neighborhood-market-stores-more-productive/#22f03c3524c5 https://www.forbes.com/sites/greatspeculations/2016/01/22/wa... Companies like Whole Foods are not typical of grocery chains. They will go wherever their niche is located. That would be like complaining there aren't Swiss watch stores on every corner. There is something to be said for branding and location, but even Walmart with their "