How do grocery stores make their money?

Discussion in 'Business & Economics' started by §outh§tar, Mar 28, 2008.

  1. Fraggle Rocker Staff Member

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    The markets have to pay more for the bottles with the Coca-Cola label than for the ones with their own label. Style is everything, after all. I also question whether the generic-brand cola they buy is in fact the same formula as Coca-Cola, even if they're buying it from the same bottler. Cola is one of the stronger-flavored soft drinks and each brand has a distinctive flavor. If the store brand was really Coke in disguise it wouldn't be very long before all the kids figured it out.
    Their overall profit margin on sales is one percent. Of course it varies from product to product. Most of their volume is in actual groceries and the markup is very low on those.
     
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  3. Syzygys As a mother, I am telling you Valued Senior Member

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    Not necesserily, it is all about consumer psychology. If you remember the New Coke story, it was better liked in BLIND studies but when presented with the label and they tried to sell it, it failed. Never underestimate consumers' habits and loyalty.

    Not grocery but gasstation story: They chemically tested a bunch of stations' gas and they were pretty much all the same, so there was no really point paying 20 cents more for a BP and Shell, unless you liked the service there better...
     
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  5. kmguru Staff Member

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    Not exactly. Some companies use gasoline additives to keep the fuel injectors from gumming up such as "polyether pyrolidone" and other chemicals. How that works, only you can tell. We have tested our Honda using lowest priced gasoline to find that after a month, the car has a rough idle and poor acceleration. Then we had to buy a concentrated fuel injector cleaner. It is hard to prove...could have water etc...otherwise people could sue the companies involved....
     
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  7. Syzygys As a mother, I am telling you Valued Senior Member

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    I know but please notice, you tested LOWEST priced products. What I said was test the same octane number but from different vendors and see if it makes a difference...

    Hardly....

    "Basically, all companies start with the same base mix and add their own little dash of chemicals to create a difference between the brands.
    Gasoline is delivered to local mixing tanks through a central nationwide pipe network, so the gas you fill up on at 7-11 is likely from the same pipe as the Chevron across the street, but you get the advantage of Chrevron's engine cleaning agents whereas the cheaper fuel at 7-11 may have the state-minimum of everything."

    http://askville.amazon.com/gas-stat...lity-gasoline/AnswerViewer.do?requestId=34898

    http://answers.yahoo.com/question/index?qid=20080201131044AA6MFjq
     
  8. kmguru Staff Member

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    Yes, most major brands have basically same products. The independent refiners sell their gas to independent retailers...some have good quality others do not. But gradually those independent refiners are taken over or merged with bigger ones. The only quality is usually the minimum octane rating. I worked for a refinery that produced bad quality products. Because they were also a major distributor, they blended their product with others (Exxon, Mobil, Chevron, Amoco) and sold them at the truck stops. After their system revamp, they did produce good stuff.
     
  9. Michael 歌舞伎 Valued Senior Member

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    I used to work at a grocery store in the USA and I can say they made their money mostly on volume. Yeah, they make a good deal on Coke and Pepsi and Doritos but most food they make almost nothing.

    So to generate money they
    - sell shelf space with eye level and ends being big ticket sellers - almost EVERY inch of shelf is rented out or even owned by Kraft, Coke, Pepsi, Nabisco, etc..
    - sell your personal information to marketing companies.
    - put candy at children's reach.
    - put lotto and smokes near the front in plain view for all the addicts...
    etc...
     
  10. Syzygys As a mother, I am telling you Valued Senior Member

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    Certain fastfood restaurants might don't even make money on the food, but they charge $1.2 for the soda, and the cost is probably less than 20 cents. Since pretty much everyone drinks, the food is just there to bring in the costumers for the cheap food...
     
  11. idiot0boy Registered Member

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    I often thought how people make money running small shops. I bet its hard when the supermarkets take more and more business off averybody.
     
  12. joepistole Deacon Blues Valued Senior Member

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    I will tell you how the small shops make money. They cannot compete with the big volume stores, and they typically operate in run down areas with high crime rates. The only way they can operate is by charging higher than normal prices you would get at a large competitor. Second, they operate by employing family members...very low cost labor...similar to small farms. Their earnings is in the form of equity in the business.

    We can see this more in fanchising now days. For example, Subway (seller of sub sandwiches) stores are pretty low volume stores in terms of sales and products. So it is a very marginal business for the franchisee. The only way to make money is to employ family members and your profits are in terms of equity in the business not in cash generated from the business. Consequently, you see a lot of immigrants in the United States go into this kind of business. Because they are industrious and have a lot of family members willing to make the kind of commitment needed, and generally they don't steal from you.
     
  13. oreodont I am God Registered Senior Member

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    Well stated. I can't say we have any areas of run down or crime but in my city immigrants, especially East Indians and Orientals, are the small business persons running the gas stations, motels, small grocers, liquor stores, etc. in every type of neighborhood. I enjoy chatting with them and learning a bit about their background and other cultural tidbits. There is one Punjabi fellow who runs a 'hole-in-the-wall' corner store and he teache me a new word in the Punjabi language ach time I go in.
     
  14. Carcano Valued Senior Member

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    How do grocery stores make money?

    By selling a drug called nicotine.
     
  15. Syzygys As a mother, I am telling you Valued Senior Member

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    I always wondered why are they called grocery stores? They sell everything, not just groceries...
     

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