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I would love to learn more about the unit economics of groceries. How is it that a small grocery store can sometimes provide things (much) more cheaply than a m
by aeblyve 1y ago
I would love to learn more about the unit economics of groceries. How is it that a small grocery store can sometimes provide things (much) more cheaply than a megacorporation? [0]
If the latter was functioning well in a competitive market, I would expect their play to be on lower margins but higher volume.
[0] Mostly I'm referring to offal TBF, which I think most firms are happy to make any money on at all.
- tossandthrow 1y agoIt is likely partly due to cost optimization (the shelf are rarely that organized in these stores) and the fact that they don't sell fresh produce.
- nine_zeros 1y ago> How is it that a small grocery store can sometimes provide things (much) more cheaply than a megacorporation? Mega corporations need to increase their returns to shareholders year after year. Mom and pops don't have anyone else to please but themselves - they're often ok with retaining same returns as last year
- pjc50 1y agoThe megacorp can provide cheap food, it just doesn't want to. In practice they adjust the margins in a data-driven way on individual goods. UK supermarkets actually provide pretty cheap fresh produce, because the market is pretty competitive. I think the most ridiculous I've seen was a 1kg bag of carrots for 20p. Many countries or locations do not have highly competitive supermarkets. Oh, and there's both volume and self-discrimination effects at work. In my supermarket shopping in the Asian food section is often cheaper as they sell big bags of rice and spices, to more cost-conscious consumers. See also: Costco.
- K0balt 1y agoIt’s just price gouging. There is an item I sometimes buy that is about $1.60 at supermarkets, but is consistently $.85 at nearly all rural Colmados. Same brand, same product , shelf stable , mass produced, large volume mover, imported product. Supermarkets have just collectively decided to sell it for 2x the “rational” market price because it went up with Covid and people kept buying it. Colmados don’t do data driven pricing, and just do a flat markup on the stuff the suplicadoras bring them. Data driven pricing is just selective price gouging under a different name.
- hansvm 1y agoCostco is an interesting one to me. They're widely touted as being cheaper, but most foods there have some sort of upscaling factor -- "organic", some sort of regional variation like "sockeye" salmon instead of farmed atlantic, a few extra steps of processing, etc. Rice, pasta, and fruit are all usually more expensive than other alternatives, even at bigco grocery competitors. You have to be a little careful if that's where you do all your shopping.
- aprilthird2021 1y agoCostco used to be cheaper bc of the bulk factor, but nowadays I think of it as a good curator. The products are usually good quality. Even if more expensive
- hollerith 1y ago>curation . . . The products are usually good quality. Costco has a strong record of getting me to buy food products that are appealing to me for a while, but that I now consider bad for my health. About the only food products I will still eat that I can buy at Costco are boneless poultry white meat, Kerrygold butter, olive oil and fresh asparagus. Costco stocks many fruits and vegetables, but most of them are much too high in sugar to be good for me, I now realize. (Berries are on the low side in sugar content, but Costco does not stock frozen raspberries or blackberries, and I avoid fresh berries because they're about 50 times as moldy as frozen ones.) Examples of foods that I eat a lot of that I cannot get at Costco are cabbage, radish and (frozen) tart cherries. In contrast, Whole Foods carries most of the 3 dozen or so foods that are good for me to eat according to my current understanding of nutrition (but not the tart cherries). I would probably be significantly healthier if many years ago I'd never become a Costco member and stuck to Whole Foods and Trader Joe's.
- aprilthird2021 1y agoI also largely go there for Kerrygold butter, meats, oils, and other bulk household goods. But the occasional furniture purchase, automotive thing, car rental, etc. It's a good deal for the price of the annual membership
- GoatInGrey 1y ago> The megacorp can provide cheap food, it just doesn't want to. This fails to explain why Walmart, the world's largest retailer, runs a profit margin of less than 3%.
- Aurornis 1y ago> How is it that a small grocery store can sometimes provide things (much) more cheaply than a megacorporation? I frequent Asian markets everywhere I’ve lived for certain ingredients, but not for my main grocery shopping. For regular groceries I don’t think there’s any secret. The markets with extra cheap groceries are just carrying different products at different price points.
- hansvm 1y agoWhen you control most of the market it works out a little differently. People can only eat so much food, but you can price gouge them relatively easily.
- kasey_junk 1y agoKroger, the largest grocery in America and one that routinely sets of anti-monopoly interdictions have a profit margin of 1.76%. What profit margin line would you suggest counts as price gouging?
- mattmaroon 1y agoIt's crazy how narrow big retail profit margins are in general. What a brutal business.
- hansvm 1y agoDoesn't that also count the investment losses they made last year, the cost of gobbling up other companies, the interest from the debt they acquired with previous expansionary practices, etc?
- kasey_junk 1y agoSure, but you can run the numbers for basically every grocery in America. The industry considers 3% margins to be outstanding.
- hansvm 1y agoThat reads more as an indictment against hyperscaled grocers than an argument that the current price gouging is unavoidable.
- kasey_junk 1y agoYou can get the same numbers out of small scale grocers too. It’s a brutal retail business with low margins and easy replacement. It’s probably the last industry I’d look to for price gauging accusations. The typical argument against monopoly grocer situations is that they are problematic for how they deal with _vendors_ not customers.
- scottiebarnes 1y agoA lot of manual labor and optimization on the marginal things. Ex: Raspberries start to get funky. Bad ones get picked out, good ones get regrouped into a new tray package. Ripe avocados with limited shelf life? Go into deep cold refrigerator overnight, back out the next day. Discount deal on volume, on everything ("2 for $X"). Cash only. etc.
- VoodooJuJu 1y ago[dead]
- tayo42 1y agoThe thing I don't get is farmers markets being more expensive.
- ac29 1y agoPeople shopping at farmers markets are presumably less price sensitive than the general grocery buying public.
- tekla 1y agoFarmers markets are incredibly shitty inefficient ways of getting food from farm to consumer. Also the people who shop at them tend to be much much richer.
- aprilthird2021 1y agoFarmers markets are often just diverting goods from the grocery store closer to you, for an upcharge (bc moving the goods one more time)
- tekla 1y ago> How is it that a small grocery store can sometimes provide things (much) more cheaply than a megacorporation? Megacorps have overheads for managing insane supply lines and lots more stringent enforcement with their product, and generally have much more oversight for things like labor. The tiny grocery store uses the kid as free labor after school to keep costs down (I was one of those kids), and generally cares less about the quality of the product at the individual level.