Grocery stores have something like a 1-2% margin, and people are often price-sensitive when shopping for food. So they'd have trouble raising prices. Probably they'd try to depend on self-checkout machines more. I imagine fast food companies like Taco Bell would lose sales.
High-margin software companies wouldn't care about the cost of their janitors, like you suggest.
Typically grocery stores only have a 1-2% margin, and also have significant shrink and inventory spoilage losses.
Curious to see what the actual operating costs/losses of the system will be -- will people fake AMZN credentials, fill a cart with steak, and walk out?
Grocery stores operate on very low profit margins already. Also, agriculture/husbandry and mass transport is heavily subsidized and regulated (in thr USA at least). It's a good suggestion, but I don't think cashiers are a major labor cost, and suspect the lessons to be gleaned from that industry will have limited predictive power.
You realize that grocery stores have some of the smallest margins, on average, of any business at around 2.2%? [1]
What do you expect them to reduce that to?
With margins that low, don't you think they are already very focused on operating with the absolute minimum number of employees they need?
A friend of mine managed a very busy grocery store for years. It's an extraordinarily difficult business.
Many grocery store chains treat their employees very well, they provide good salaries and training programs. It's one of the few businesses left where you can start out as a bagger and work your way up to senior manager, with all costs paid by the store.
Other than inventory cost, this is their highest cost.
I think the 1.5% margins would be a problem though. Plus I image the big supermarket chains have the benefit of large economies of scale taht the small individual stores don't have.
Grocery as an industry has one of the lowest profit margins of any industry. It’s also very competitive. So I would expect that savings from self-checkout will offset other rising costs (e.g. $15 minimum wage) and allow consumers to continue to enjoy low costs.
Essentially, over time. If you could also prevent other existing competitors from offering Wallmart-level pay or worse. In this scenario, the demand for groceries didn't disappear - just Wallmart did, and now there's all these ex-Wallmart people looking for a job. New grocery stores would form, and if they paid enough to get these people off welfare, that would be (per GP) $6B of money freed to be allocated elsewhere. Food prices could raise a little bit, though, and food variety could get reduced (but these are not necessarily bad in the balance).
I would assume that grocery store margins are that low because they price competitively, so this will just drop prices by a few % and the grocery store margins will stay the same.
Larger grocery store chains (i.e. Safeway) have a tremendous price markup, often times reaching 50%. This markup contributes to their profits, of course; but it also helps offset losses from the inefficient process of distributing perishable goods to consumers. If they could improve that efficiency while keeping prices constant, then grocery store chain profits could benefit substantially.
Grocery chains are notoriously low-margin businesses though. Maybe a few places are able to gouge, but as a whole, they cannot and still be low-margin as an industry.
This could happen in theory, yeah, but in reality (especially in America) I think there's zero chance of that happening at meaningful levels
The audience who buys high-margin grocery items is almost entirely separate from the audience who would even semi-regularly eat at a community kitchen.
How much of that cost reduction goes into building new stores? How many new stores in any case are going to food deserts rather than places more profitable for the retailer?
I would guess nowhere near enough to support the notion that this cost reduction leads to new stores, or that new stores would appear in food deserts.
I don't want self-checkouts to disappear. I just don't want to be lied to about their purpose, and in particular they ought to make it worth my while to use them by offering at least some tiny discount. The fact that they don't tells us all we need to know.
No, it would not. Consumers are price sensitive for food, and profit margins are not the same across different types of substitute goods.
It's precisely how Dollar Trees and Dollar Generals have been pushing out grocery stores in the US right now, by not offering fresh produce, meat, or other traditional loss items. Planet Money even has a podcast on it: https://www.npr.org/sections/money/2019/04/26/717665452/epis...
Imagine the grocery store in your area carrying only frozen and canned meat and produce, because that is what it would push.
Well, i’m not in the local grocery business, but some avenues i would explore are:
tariffs on importing mostly single use soon-to-be-trash from china - something that would cut into their business model in a big way. Decent antitrust to prevent some of the monopolistic practices that mean DG and Walmart can get better deals from distributors. Requiring a livable wage for the one or two cashiers might be enough, honestly. I’m sure there are plenty of others i’m unaware of. The systems we have are what enable this business to exist, and make it hard for healthier (both in terms of food sold and their impact on communities) business to exist.
I wonder what groceries would cost if we didn't buy them with cash or credit but instead a "Foodcare plan". I also wonder what the bills would look like in that case. If I went to the deli, I imagine there'd be all kinds of interesting blade sharpening fees and glove disposal fees and whatnot.
High-margin software companies wouldn't care about the cost of their janitors, like you suggest.
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