[lotsofpulp]

Retail business profit margins are 1% to 5%. Mathematically, how can the prices be any lower without the business failing? Hence we see similar prices everywhere.

Grocery stores especially have 1% or 2% profit margins, so logically, the things they sell must be priced as low as they can. And also why a mom and pop grocery store cannot compete with Walmart/Kroger/Costco/Target/etc, you need those huge economies of scale otherwise your prices will be uncompetitive.

[bgirard]

How can grocery store have a 1% to 2% profit margin, when the price of the same item across grocery store chains can vary by 10-30% or more? I can't imagine it coming down to a store having higher costs alone.

[gruez]

>How can grocery store have a 1% to 2% profit margin, when the price of the same item across grocery store chains can vary by 10-30% or more?

1. Individual price discrepancies of "10-30% or more" doesn't really matter. What does matter is overall markups.

2. The stores themselves might be upscale/higher tier, which also makes their stuff more expensive. I'm not talking about whole foods carrying organic products, I'm talking about stores that have better selection, full service butcher/deli, better cleaning, better interior design/decoration, or better location (richer neighborhood).

[Jensson]

Ask yourself why the stores that charges 30% more are still around? Likely they operate in different areas, or they offer some services the cheaper place doesn't, or they have higher quality wares etc. Otherwise everyone would go shop at the cheaper store.

Now ask yourself, why doesn't the cheaper store offer those things? Maybe because they costs something?

[lotsofpulp]

>I can't imagine it coming down to a store having higher costs alone.

Your other option is assuming there is industry wide financial reporting fraud across multiple businesses and multiple countries for many decades.

Stores have different costs due to selling:

1) different quality of goods

2) employing different quality/quantity of workers

3) different locations having different real estate/insurance/tax/labor costs

4) offering fewer or more services/products

Etc.

[dclowd9901]

In 2022, Kroger made $2.2B on $34.8B sales. That’s more than 6% _profit_, never mind margins. These companies are making way more margin than you are saying they are.

Edit: looks like that was just the quarter — still 1% profit which means margins must be far higher. Margins in retail, by the way, are mark-up over wholesale cost.

Source: https://www.cincinnati.com/story/money/2023/03/02/how-much-d...

[gruez]

Where are you getting this? This site shows around 2-3% margins.

https://www.macrotrends.net/stocks/charts/KR/kroger/profit-m...

[PowerfulWizard]

I think above grabbed Gross Profit rather than Total Revenue, this page shows a 1.1% profit margin: https://finance.yahoo.com/quote/KR/key-statistics?p=KR

[SideQuark]

Those numbers are wrong. Yahoo shows their financials: revenue was 122b, 132b, 137b, 148b for years 2020-2023. Normalized the income was respectively 1.4b, 1.7b, 2.3b, and 2.8b.

[lucas_membrane]

Kroger buys other retailers. Their income (and their taxes) will be reduced by (amortization of) the intangible cost of the retailers bought. This is money paid to the shareholders of the retailers who sold out, which should also be counted as income of the retailing sector.

Furthermore, we now have an economy in which many so-called industries have a single-winner or have a race to become the single-winner now in progress. So just about every firm that advertises is paying uncompetitive rates for eyeballs in the media markets, every firm that accepts credit cards paying uncompetitive rates for payment processing, and seemingly every firm that wants to have more control over its pricing is paying exorbitant executive compensation for those who are supposed to bring that about. If the firm is at all profitable, the customers pay for all of that, too.

[lotsofpulp]

> Kroger buys other retailers. Their income (and their taxes) will be reduced by (amortization of) the intangible cost of the retailers bought. This is money paid to the shareholders of the retailers who sold out, which should also be counted as income of the retailing sector.

This does not make any accounting sense. Profit (net income) is not a function equity, and what if the prior owners lost money on the investment?

Also, what intangibles are you referring to in a grocery business? The buildings, real estate, supplies etc are all tangibles.

[lucas_membrane]

If a corporation buys some stores from another corporation it pays a price. It then values all the tangible assets to find out how much it puts on its books as tangible assets to be depreciated over their respective useful lives. It will quite typically find that it paid more in total for the acquisition than the tangible assets are worth, but it is not usually required to report a loss for paying more than the sum of the values of the tangible assets. The difference is the value of the acquired businesses as going concerns, sometimes called 'good will.' That becomes an asset on the acquirers balance sheet to be depreciated over some period of time. The acquirer may also be able to assign some of the purchase price to capitalize such assets as deferred tax credits, contracts signed by the sold business, trademarks and licenses, etc. Those assets may be written down over years to offset income of the combined entity that would otherwise be taxable. Then there is the possibility of buying a corporation, holding it for a few years and then spinning it off tax-free, which can equivalent to a huge dividend to the shareholders of the purchasing company that never was taxable as corporate income.

[SideQuark]

>which should also be counted as income of the retailing sector

This makes no sense.

If I own an asset worth X and sell it for X, I made zero profit. Paying shareholders to buy them out is not all profit, it's trading one asset for another.

Next, these deals are rarely simply cash giveaways, but include all sorts of other asset trades (stock in new company, payment over time... etc), also not being simply magic pure profit. Next, they're not simply taken out of one year's profits, but are generally financed by taking on more debt, so this is not some way to hide or reduce profits.

>we now have an economy in which many so-called industries have a single-winner or have a race to become the single-winner now in progress.

This is simply untrue. Pretty much every industry has lots of players. And there's constant churn. There's nearly zero product categories I cannot shop between many sellers.

The larges US banks have under 20% share, and there's literally thousands of banks.

The largest US grocery by dollar share include: Walmart 18%, Kroger 8.8%, Costco 6.4%, Albertson 6.4%, Delhaize 4.3%, Publix 3.7, Sams Club 3.6, Target 2.4, and literally hundreds more.

The same pattern of the largest company follows in pretty much every industry.

So pick some industries where you think there's a single winner that make up a decent amount of consumer sales and list them. I don't think you'll find any.