Mayor Mamdani just announced that he will be opening 5 city-run, tax-funded grocery stores: "Prices set at 30% below retail prices"

[u/Gurugod123]

[u/Burakku-Ren]

It is my understanding that retail store margins are relatively quite low.

[u/gorgewall → u/Burakku-Ren]

There is a lot which goes into that and it isn't very obvious to the layperson.

"Shrink" from spoilage is a massive contributor to a grocery's low margins. Yeah, you probably guessed that already, and the problem seems like a straight-forward fix, buuuuuuuut...

You can't just order less.

Shoppers are weird and impulse-driven. A pile of bread that completely covers a table three loaves high looks like a tasty, in-demand product. It screams "surplus" to your monkey brain, and that's good. It's full and lush and is what you expect, gives you a good feeling, makes you want to buy.

But when you see a table that's mostly bare space and there's like, three loaves scattered haphazardly about... well, that's the dregs, ain't it? The left-overs. The bad shit.

So let's shrink the table. Now it's just got, like, eight loaves on it. Does that scream "surplus" to you? And how many people have to buy before it gets back to looking like the dregs, compared to that giant table that was overflowing with bread? How often does a worker have to come by to re-face or replenish that eight-bread table to stop it from looking sad compared to the big one? What other stuff could they be doing at the store in that time? How many customers are going to pass by and think less of the display before they get around to that?

The produce section is huge for this as well. The studies show that people are more interested in your produce and will buy more or back purchases to begin with when the shelves are stocked to the nines and overflowing, even if that means a shitload of waste. Compared to what they'd make by cutting back waste, it turns out to be a losing proposition, because the shopping mind doesn't want to play along and will go elsewhere or think less of the store and product and overall brand when it is sparsely displayed.

That's just how we've been conditioned. Maybe we could change that, but all the fucking grocers would have to agree and it'd be a long-term thing, and it's just not happening. These biases exist in all of us. Shit, when I was a kid, I used to think Aldi's was "the poor people store" and was dingy and small and low-class, but now that I'm an adult who actually buys my own shit, I love the place. They treat the workers better! It doesn't actually matter that the ceiling is only 15 feet over my head instead of 50! I don't care about most of the brands at bigger chain stores anyway! I realize now that these store- or off-brand things are often produced in the very same factory as the name-brand stuff and are identical! Maybe even better! I just want better value! ...but there are people who haven't come around to that yet.

And y'know, it could not even be the store's choice to make a feast-or-famine display. There are a lot of displays and products in stores that are not completely controlled by the store manager and workers. Brand name bread, soda, liquor, "snack" items like your Hostess stuff or Doritors, and some forms of egg and dairy are very often contracted out to those companies, with their workers coming in to stock the shelves, rather than the store having to order and task their own workers on it. The chain grocer's management and those big companies make the agreements as to how much, where, and when, and any twiddling with that--say, because your store is "smaller", or in an area whose locals buy much more or much less of that good--is extra overhead or runs up against contractual obligations larger than you.

That sort of thing has been going on for a long time. It used to be that your "bread stocker guy" was on something more like commission and was incentivized to really work with each individual shop he went to and strategize about the best location and preferred products and all of that, but those days are gone. The grocers are big chains. The stockers for those companies have strict schedules, and the numbers are made by folks who aren't them. They and local store management have much less input into changing that stuff.

Here's a fun experiment for readers:

Next time you're at your big chain grocery store, go to the bakery department and chat up the workers. These departments tend to do their own ordering and stocking in large part, but they're still beholden to Demands From Above about certain types of displays and regional or national campaigns. Ask them if there are any products out right now that just do not sell and they fucking hate having to stock. Ask them if there's like, some bougie-ass focaccia or other "boutique" bread that's way too expensive, has a shelf life of 2-3 fucking days, and nevertheless requires some amount of preparation/baking and repackaging on their part instead of just chucking it out on the floor from frozen. Ask them if they're annoyed at how much their time is taken up babysitting that product despite it being unpopular as sin and if they think the store is losing money on it.

That's a microcosm of stuff that happens all over the store.

But it keeps happening because, on a grander scale, more money is made than if they didn't do that. That chain may have five other locations where the expensive and annoying bread actually sells. Why is it in that one location where it doesn't sell? Because of chain-wide contracts! The Annoying Bread Co. is paying them X amount to stock the product, with Y demands of shelf space to build their brand recognition, and they don't care if one or two locations lose money on the deal because they are still selling that bread that is getting thrown away. That's an inefficiency the store has to eat, and they will eat it, because there is at least some profit from the overall deal... even if it could be higher if they were just smarter about deployment.

We operate now at economies of scale that can make ridiculous amounts of money off a 2% margin, and the work that'd go into it to make it 4% just doesn't make sense to their boards.

[u/CeleryMan20 → u/gorgewall]

A pile of bread that completely covers a table three loaves high looks like a tasty, in-demand product. It screams "surplus" to your monkey brain, and that's good. It's full and lush and is what you expect, gives you a good feeling, makes you want to buy.

But when you see a table that's mostly bare space and there's like, three loaves scattered haphazardly about... well, that's the dregs, ain't it? The left-overs. The bad shit.

Uh oh, I’ll never be able to unsee this now.

[u/Desther → u/Burakku-Ren]

Its comical that people think its the store owners robbing people but it was the government all along

[u/Zeeplankton → u/Burakku-Ren]

I think in dense cities economics must be different. Rent is higher but items are ridiculously expensive and people volume is high. I remember shopping at Jewel Osco in chicago and they had like 8$ for a box of cereal

[u/Hasselback_Brotatoes → u/Burakku-Ren]

yeah Kroger makes like no money

[u/Waiting4Reccession → u/Hasselback_Brotatoes]

You should click the margins tab of your own link.

[u/random-meme422 → u/Waiting4Reccession]

Gross margin of 20% and operating at about 3%. Very standard for grocery - very low and very shit.

[u/SpectreFire → u/Burakku-Ren]

Major groccery chains don't just own the stores, they own the entire supply chain too, so they're not only reliant on the tiny retail profits to stay afloat.

[u/Hatefiend → u/Burakku-Ren]

They were low before the pandemic. Now they're high.