Tag: Deflation

Over the summer, we argued that the grocery business in the U. S. is, and always has been, a fairly miserable one. From A&P to Grand Union, Dahl’s, etc., bankruptcy courts have been littered with the industry’s failures for decades.
The reason for the persistent failures is fairly simple…razor-thin operating margins that hover around 1-3% leave the entire industry completely incapable of absorbing even the slightest financial shock from things like increasing competition and food deflation.
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Meanwhile, if these retailers have difficultly absorbing even the slightest changes in competition and food inflation, you can only imagine how the efforts of Amazon to slash in-store employee headcounts, a line item which Kroger spends roughly 17% of their revenue on, might impact the fragile industry. Unfortunately, at least for the traditional grocers of the world, a completely automated shopping experience may be closer than they had hoped just a couple of years ago.

This post was published at Zero Hedge on Dec 18, 2017.