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.
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.