[govindkabra31]

Or, they get 20-25% discount from retailers (coming out of stores marketing budget and reduction in store staff cost).

EDIT: The discounts come from the cost savings stores will see from delivery companies, to clarify to people commenting margins are not that high in grocery business.

1) These delivery services are become sales and marketing channel for stores.

2) Cut down time it takes for cash register scanning each product and bagging them, pick up guys do that for stores.

3) Bulk pickups-- e.g., if I can have delivery company gather milk directly from back store, my store staff does not have to spend time replenishing the shelves.

[refurb]

What's the margin on groceries? 1-2%?

[lesterbuck]

A great Mixergy interview[1] was with Herb Sorensen, author of "Inside the Mind of the Shopper"[2]. There were many fascinating revelations about the grocery business. For example, he went through the four revenue sources for grocery stores and profit on selling the goods was in fourth place, behind real estate, shelf fees, and something else I can't remember. He also explained that there is an optimum layout for a store, with counterclockwise flow.

[1] http://mixergy.com/interviews/brick-mortar-retailers-herb-so...

[2]http://www.herbsorensen.com/herbsorensenauthor.html

[Semaphor]

Pretty much it seems:

> "The average profit margin for grocery stores is 1.3 percent" says Jeff Cohen, a grocery industry analyst with IBIS World.

-- http://www.marketplace.org/topics/business/groceries-low-mar...

[coryrc]

That's net, not gross. They can afford to cut the item price if they have lower marginal costs (stocking?).

[trounce]

Average gross margin in a traditional grocery store in the US is 26-33%, depending on local competition. There is a huge range (0-90%) by product category however.

Net income after labor, distribution, and fixed costs ranges 1-6%, depending largely on market share and fixed cost control

Reference: I helped traditional retailers with price optimization for almost 20 years