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What is the difference between what they're doing & every other grocery store? I'm not sure I understand the difference after skimming through the article exce

What is the difference between what they're doing & every other grocery store? I'm not sure I understand the difference after skimming through the article except that they have a reputation for more expensive, organic foods.

tptacek 7y ago
Durable, nationwide discounts on low-margin, premium products aren't a norm in the grocery industry. It would be similarly noteworthy if Kroger started selling dry-aged prime ribeyes at $8/#. (Less so if Costco did it, but Costco isn't a normal grocer).
- EpicEng 7y ago
  Two minutes of searching tells me differently. Grocery stores have used loss leaders for decades to get people in the store. Why do you say the opposite?
  - ip26 7y ago
    Loss leaders aren't new, but usually they are either temporary, local, or on low-value products (think oranges, chips or soda instead of salmon)- or all three.
    - reaperducer 7y ago
      For the entire time I lived in Cincinnati, one of the local hypermarket chains sold gallons of milk for 99¢ as a loss leader. Lots of different kinds of stores do it. It's not special because it's Amazon Foods.
    - jorams 7y ago
      I thought the article was pretty clear that the loss leader price was only active for one week? That's very temporary.
      - ip26 7y ago
        My mistake, sorry. I got thrown by the parent's "durable".
  - tptacek 7y ago
    Even Costco's prime ribeye bulk packages don't turn out to be loss-leaders, despite widespread belief to the contrary. Here, the evidence suggests that Whole Foods halibut is in fact a nationwide loss leader.
- sct202 7y ago
  Per the article this is a 40% discount for one week, which is unremarkable as far as grocery store sales go.
- gamblor956 7y ago
  Kroger (Ralphs, etc.) sometimes sells grass-finished prime ribeye at $8/lb...as a loss leader to get people to buy the high-margin condiments, etc. they would eat alongside the meat. The sales only usually last a day or until supplies run out, but it does a pretty good job of bringing the keto crowd in.
  - xkcd-sucks 7y ago
    >grass-finished prime ribeye. >the high-margin condiments, etc. they would eat alongside the meat. The horror!
dominotw 7y ago
From article “They might be selling those at cost or as loss leaders just to get people into the stores,” Besecker said.
- EpicEng 7y ago
  Which grocery stores have been doing for years.
  - dominotw 7y ago
    does krogers have equivalent of aws to eat its losses?
    - omegaworks 7y ago
      Quality, sustainable food should be subsidized. I'm not understanding why this is not a win.
      - chipperyman573 7y ago
        Because if Amazon can beat out the competition, if they become a monopoly they might not keep the prices low.
panarky 7y ago
MSC ensures sustainable fishing practices, and this is costly. https://fisheries.msc.org/en/fisheries/us-north-pacific-halibut/ https://fisheries.msc.org/en/fisheries/us-north-pacific-hali... After Amazon acquired Whole Foods, many speculated that they would lower prices by reducing quality. This is an example of lowering prices while maintaining standards.
- loeg 7y ago
  > This is an example of lowering prices while maintaining standards. Nah. It's an example of a "loss leader." The zero-margin price on some items isn't sustainable on all items and just serves to get people in the door. It's a shade of the same spectrum as "predatory pricing," which can be illegal but is not always. https://en.wikipedia.org/wiki/Loss_leader https://en.wikipedia.org/wiki/Loss_leader https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing
  - adventured 7y ago
    Amazon can in fact take their grocery business to zero profit safely, trivially. That includes taking Whole Foods down to near zero operating profit levels. It's the ideal approach and classic Bezos. Their competitors can't afford to match it in the hyper low margin grocery business. Walmart can try, however their profits have already been badly squeezed downward for the last five or six years in a row now, in competition with Amazon. Kroger, a $121 billion sales giant, has a mere 2% operating income margin. Amazon can tip them over and kill them very easily by eliminating that small remaining margin. Kroger effectively has zero margin of safety in their business, they can't afford even the smallest of drawn out price wars with Amazon. Kroger also has little safety buffer in their balance sheet, barely positive in assets and a small sliver of cash; while Amazon has $37 billion in cash. Bet on a Kroger bankruptcy or forced sale in the coming decade, pinned between Amazon and Walmart. AWS is set to be a ~$15 billion per year profit juggernaut five years out. Their ad business is going to generate a minimum of $8 billion in profit at that point. They can very easily bury the entire US grocery industry at zero margin to pursue aggressive market consolidation (the grocery market is extremely fractured). There is no other means for them to compete in groceries other than for Amazon to take the margin down to a level where they drown everyone else in their path, while not having to worry because of their profit offsets in the rest of the business. Predatory pricing is not a concern in this scenario. Walmart has always done exactly the same thing in subsidizing one part of their business with another depending on where they're looking to expand market share. They've rarely had a problem with regulators over it.

tptacek 7y ago

Durable, nationwide discounts on low-margin, premium products aren't a norm in the grocery industry. It would be similarly noteworthy if Kroger started selling dry-aged prime ribeyes at $8/#. (Less so if Costco did it, but Costco isn't a normal grocer).

EpicEng 7y ago
Two minutes of searching tells me differently. Grocery stores have used loss leaders for decades to get people in the store. Why do you say the opposite?
- ip26 7y ago
  Loss leaders aren't new, but usually they are either temporary, local, or on low-value products (think oranges, chips or soda instead of salmon)- or all three.
  - reaperducer 7y ago
    For the entire time I lived in Cincinnati, one of the local hypermarket chains sold gallons of milk for 99¢ as a loss leader. Lots of different kinds of stores do it. It's not special because it's Amazon Foods.
  - jorams 7y ago
    I thought the article was pretty clear that the loss leader price was only active for one week? That's very temporary.
    - ip26 7y ago
      My mistake, sorry. I got thrown by the parent's "durable".
- tptacek 7y ago
  Even Costco's prime ribeye bulk packages don't turn out to be loss-leaders, despite widespread belief to the contrary. Here, the evidence suggests that Whole Foods halibut is in fact a nationwide loss leader.
sct202 7y ago
Per the article this is a 40% discount for one week, which is unremarkable as far as grocery store sales go.
gamblor956 7y ago
Kroger (Ralphs, etc.) sometimes sells grass-finished prime ribeye at $8/lb...as a loss leader to get people to buy the high-margin condiments, etc. they would eat alongside the meat. The sales only usually last a day or until supplies run out, but it does a pretty good job of bringing the keto crowd in.
- xkcd-sucks 7y ago
  >grass-finished prime ribeye. >the high-margin condiments, etc. they would eat alongside the meat. The horror!

dominotw 7y ago

From article “They might be selling those at cost or as loss leaders just to get people into the stores,” Besecker said.

EpicEng 7y ago
Which grocery stores have been doing for years.
- dominotw 7y ago
  does krogers have equivalent of aws to eat its losses?
  - omegaworks 7y ago
    Quality, sustainable food should be subsidized. I'm not understanding why this is not a win.
    - chipperyman573 7y ago
      Because if Amazon can beat out the competition, if they become a monopoly they might not keep the prices low.

panarky 7y ago

MSC ensures sustainable fishing practices, and this is costly. https://fisheries.msc.org/en/fisheries/us-north-pacific-halibut/ https://fisheries.msc.org/en/fisheries/us-north-pacific-hali... After Amazon acquired Whole Foods, many speculated that they would lower prices by reducing quality. This is an example of lowering prices while maintaining standards.

loeg 7y ago
> This is an example of lowering prices while maintaining standards. Nah. It's an example of a "loss leader." The zero-margin price on some items isn't sustainable on all items and just serves to get people in the door. It's a shade of the same spectrum as "predatory pricing," which can be illegal but is not always. https://en.wikipedia.org/wiki/Loss_leader https://en.wikipedia.org/wiki/Loss_leader https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing
- adventured 7y ago
  Amazon can in fact take their grocery business to zero profit safely, trivially. That includes taking Whole Foods down to near zero operating profit levels. It's the ideal approach and classic Bezos. Their competitors can't afford to match it in the hyper low margin grocery business. Walmart can try, however their profits have already been badly squeezed downward for the last five or six years in a row now, in competition with Amazon. Kroger, a $121 billion sales giant, has a mere 2% operating income margin. Amazon can tip them over and kill them very easily by eliminating that small remaining margin. Kroger effectively has zero margin of safety in their business, they can't afford even the smallest of drawn out price wars with Amazon. Kroger also has little safety buffer in their balance sheet, barely positive in assets and a small sliver of cash; while Amazon has $37 billion in cash. Bet on a Kroger bankruptcy or forced sale in the coming decade, pinned between Amazon and Walmart. AWS is set to be a ~$15 billion per year profit juggernaut five years out. Their ad business is going to generate a minimum of $8 billion in profit at that point. They can very easily bury the entire US grocery industry at zero margin to pursue aggressive market consolidation (the grocery market is extremely fractured). There is no other means for them to compete in groceries other than for Amazon to take the margin down to a level where they drown everyone else in their path, while not having to worry because of their profit offsets in the rest of the business. Predatory pricing is not a concern in this scenario. Walmart has always done exactly the same thing in subsidizing one part of their business with another depending on where they're looking to expand market share. They've rarely had a problem with regulators over it.