I find it nearly impossible to buy non-food items online. I would much rather go in person to inspect the quality. If I can't, I usually end up sending things back. More likely, I end up being dissatisfied with the product, since I don't want to bother with repackaging and sending it back. Youtube reviews are shilled nonsense most of the time, where they just unbox the item and look at it without even using it.
Repackaging it is a literal strip of tape and throwing it in a drop box that’s likely less than two miles from your house.
The phenomenon that cracks me up, tho, is retail stores serving as points of return for Amazon! Kohls is so damn thirsty for foot traffic they’ll accept returns for a direct competitor!
CVS and Autozone I kind of get it. If you need a prescription or hemorrhoid cream or a car battery you’re probably not waiting on Amazon… but when literally everything in your store is also available on Amazon?
With reputable retailers one doesn't have to worry about getting a fake item, unlike Amazon. And if one really wants a QOWXYZ brand product, it's half the price or less on AliExpress or Temu.
Amazon seems to be in a place where they're getting harder to trust every day, but way more expensive than the dubious direct from China sellers.
LOL I’d love to be a fly on the wall during those discussions at Amazon about why the hell they are allowing those “brands” in their marketplace. I mean, does anyone actually think they are legit? But then again people must buy them and they must make money for Amazon. What a circus!
My current rule is I won’t buy anything with a mains electrical plug, anything Hugh value, or anything that can be easily counterfeited from Amazon. I just don’t trust them in the slightest to do anything but run a datacenter.
Another thing to be careful of is anything that could have adverse health effects if counterfeited, like food, supplements, cosmetics, safety equipment, cooking utensils, and so on. Which I guess leaves books as something relatively innocuous, even though those have also been counterfeited before.
I agree, but I don't know of any stores where I am able to really inspect a product. I end up wading through review after review and trying to see if people were troubleshooting the product for the use case I intended.
I don't know if there's a solution. Nearly every place online is inundated by advertisers trying to game the system, and they ooze further into the corners with each passing month.
It's rare that brick and mortar stores actually have what I'm looking for in stock (exceptions include home improvement stores). They always offer to order it for me, though, as if that's a magic power.
I find it nearly impossible to find quality items in person. I have to order online to have a wide enough selection for most things to not be cheap junk. In person stores stock a bunch of items that aren't up to my expectations with the hopes that they'll sell. They end up increasing costs and lowering quality.
I really dislike large stores. They are so overwhelming. I find the average grocery store in the US to be way too big.
As a highly specialized retailer looking for a very small space, it is incredibly difficult to find. Commercial property owners would rather keep their store fronts vacant than deal with 10 small shops instead of 1 big one.
Funny - I was just thinking* about some of what you've described. In my book, a great deal of what a certain group of predators and naive individuals consider "capitalism" is hollowed of its core. Hollowed of aspects those who truly understand and have faith and respect for capitalism - well-founded faith and respect - generally consider essential.
People like Warren Buffett and Charlie Munger are / were far closer to sound / faithful capitalists than most seem to be, lately:
Those who stress the idea that "greed is good" set themselves (and, unfortunately, the rest of us, as well) up for misery and the kinds of instability / inequality / tightrope walk that may culminate in events like the Reign of Terror (one example that always comes to my mind, at least - a la Les Misérables, for example [but, so much more than 'just' that theatrical version of events]).
* ~3 hours ago - and, not a common thought at all for me (though thinking about economics in general is common)
Perhaps in specific cohorts. Most working class elders throughout history receded into the background once they became too old for manual labor. They weren’t pointing at a Schwab app trying to make us believe some number computed by logic and data structure that’s difficult if not impossible to verify, is the only justification needed for them to buy up all the land.
> I really dislike large stores. They are so overwhelming. I find the average grocery store in the US to be way too big.
Some retailers actually intentionally make the stores overwhelming and disorienting since they believe that it increases sales.
I worked at Walmart for one summer during my undergrad. We had to re-shelve a ton of items, moving them from one aisle to another. It made no sense to me. I asked the manager why we are doing this and he said that moving items from one location of the store to another forces customers to stay longer in the store and walk through more aisles while they search for the item that they want. They actually want to make it slightly difficult to find something since it forces people to spend more time in the store. The manager said that the data shows that the longer people are in the store, the more that they buy, so they try to make people spend as much time in the store as possible to increase the likelihood they make an "impulse purchase".
(Granted, this seems to confuse correlation with causation, since time in the store isn't directly leading to people buying more stuff. Surely people who buy a lot of items take more time to get the items, but I personally think forcing people to wander around the store is mostly going to just annoy people, myself included. That said, there is apparently a large enough percentage of people who may buy more because of this, and some retailers make that apparent tradeoff to increase sales.)
> Some retailers actually intentionally make the stores overwhelming and disorienting since they believe that it increases sales.
Costco being a prime example. Not sure if all of the stores are laid out the same, but the ones I've been into can generally be described as "make it through a gauntlet of novel, ever-changing stuff that attempts to lure you into impulse purchases on your way to the back of the store, where the staples you came for are located, then make your way back to the front of the store, though another orgy of consumer products, and hey, you've already said no to the fleece vest and the shrimp shu mai so you might as well treat yourself to the 3 pound jar of chocolate caramels".
And, the isles are deliberately[] designed to be hard to see down. You can't just easily spy that 20lb Krusteaz pancake mix, you have to walk through all the baking isle products in order to find it.
or so I've read, heard or maybe made up some fiction
This kind of behavior leads to the growth of small stores where you can get in and out quickly--Dollar General and other dollar stores in the case of Walmart.
I’m not even sure the economics make sense. Like if I buy toilet paper, I just want to buy as much as possible and not have to worry about it. Same with other staples. Costco delivers bulk goods with excellent quality at a good price. I’m not even sure I’m saving money honestly.
Basically, when I buy something at a regular store, I'm shocked at the recent inflation.
But at Costco, most things have barely budged at all in the past few years. And that's starting at a lower base as well - at the moment it's simply nuts how much cheaper things are there.
In fact, if you look at their financial statements, their entire profit equals their membership fee income - this means you're buying things at cost price on average. And Costco is known to be brutal to their suppliers, using their market position to force lower prices and larger pack sizes onto the manufacturers.
They don't sell everything though - there are some items you have to buy on Amazon or a regular grocery store. But almost (not entirely) every time that Costco sells something, it's the best deal you can get.
Another downside is you have to buy a LOT of what you're buying. So it only makes sense if you're planning ahead somewhat, and if you have room in your fridge/freezer/garage.
EDIT: actually the main drawback is the hugeness and remoteness of the store, and the immense number of other shoppers. But again, this plays into going every couple of weeks and buying ahead. These things are inherent in their model and I accept it. I actually spend less total time shopping now because I do all of it in 60-80 minutes every two weeks.
Another edit: none of this means that the quality is any lower. Somehow, they're delivering excellent meat, produce, and more at a fraction of the cost.
Maybe I should buy shares in this company. They barely have a profit margin though.
I have a relatively large family and the quantities required still don’t make sense for most items in my case. However the gas prices keep me a member.
Just another third party booking service. Last month a rental from Budget through Costco travel for a six days in CA was around $340. The same thing on rentalcars.com was over $500.
I mean, you joke, but you've shown ability to get to the store, fill out an application, pay the $200 or whatever... that at the very least means you are probably not in, say, the 5% worst risk category. Damages that can be caused to something like a hotel room or rental car are essentially unlimited.. avoiding the worst risks is really good.
Below average is fine, you just want to avoid horrific.
I mean, they have hosted weddings at Costco before. Next step, bride or groom ordering service? Wonder how they handle returns in this scenario. Probably 90 days like electronics.
Obvious trolling, so I’ll spell it out for you. IAmGraydon and I live in the same neighborhood. Obviously, Costco only sells wives in packages of 8 (Kirkland brand). We went in with 6 other friends on this one.
That does sound great for you, but I'm not in a polycule, and I don't think I've got room in my pantry for the spare wives. I guess it's just not for me.
Product curation at Costco is another key aspect. If Costco sells it then it’s a decent product, they stand behind it, and the product is a good value. I trust them not to pass off bad merchandise on me.
This is the biggest reason I love Costco. If you need something they're selling you'll only have a couple options, all will be at least decent, and it's usually obvious which one's for you.
E.g. I needed a shredder. There were two, a smaller one and a bigger one. I got the smaller one without needing to think or comparison shop because I know it will work for me (absolutely no issues in 6 years) and it's a decent to great price.
On the very rare occasion I get a dud, they happily take returns. Last winter I returned a two year old fridge and they didn't even ask for evidence of my issue
Having a Costco downtown and 15 minute walk from me is the best experience a human can get. I just stroll to get one item when I have nothing better to do.
Yeah, it’s always funny to explain it to outsiders, but I wish it was ubiquitous everywhere. Every time I think about moving away one of the things that pops up in my head is — “ah, but I will miss dt Costco!”.
I buy literally everything I can at Costco. All my groceries, paper products, detergents, batteries, light bulbs, tires, appliances, and even many electronics. I even booked a vacation to Saint Lucia through Costco Travel and it was flawless. I have an executive membership, which is $120/year, but also gives me 2% back on all purchases. I spend enough there every year that it completely covers the cost of membership.
I currently spend the same there every month as I did 5 years ago. Inflation has barely touched it except for a few items like beef and fish, which have recently come back down in price.
I don’t understand the complaint some people have that it’s hard to shop there because quantities are too large. I use everything before expiration and end up throwing away very little. For short expiration item like meat, just use your freezer.
"if you look at their financial statements ... you're buying things at cost price on average"
Not quite.
Costco's gross margin is ~12% of revenue. That means their average markup (including revenue from membership fees) is over 10%. If membership fees are about 2% of revenue, and other income (e.g. commission from the vendors near the exit), then Costco's markup is in the 8% to 9% range.
If we were buying things at cost price on average, then Costco would not have enough money to pay for rent, staff etc.
I mean true cost, not just COGS. If we all had to buy straight from the vendors, we’d have to pay the COGS as well as replicate the functions you mention.
It sounds like you're saying that it's preferable to buy from a retailer whose net profit (as a % of sales) is as low as possible. Because that means the price you pay is as low as possible (relative to what you call 'true cost').
If that's the case, then you could do even better: don't shop at profitable retailers. Only shop at places with really low net income. Better still, shop at places that are so badly run that, even though they have high gross margins, waste so much money on overheads that they lose money overall.
(I'm not suggesting Costco is poorly run, or is a bad place to shop. Just trying to illustrate why focusing on total costs instead of COGS can lead to absurd conclusions.)
> If that's the case, then you could do even better: don't shop at profitable retailers. Only shop at places with really low net income.
What does low net income have to do with anything? Profit margin tells you how much the middleman is keeping. The lower the profit margin, the lower the prices, for something as fungible as retailing consumer goods.
A business needs at least a minimal profit margin to survive a little volatility. That is why Walmart/Costco/Kroger have 2% profit margins. If anyone could deliver those goods for cheaper, they would, but they probably cannot as evidenced by competitors going out of business.
>Better still, shop at places that are so badly run that, even though they have high gross margins, waste so much money on overheads that they lose money overall.
Businesses that lose money tend to get shut down by the owners, since people generally do not like to lose money.
"What does low net income have to do with anything?"
Please read the comment to which I was replying. My whole comment was written to explain why we shouldn't focus on net income, and instead focus on COGS. You're making the same point I was.
Not everything at Costco is a win price-wise, but if you do even a small amount of research you can find a number of items that are huge wins.
A pint of pure vanilla extract for $9.99. Dog treats at about half the price of pet smart or online stores. Kirkland brand Flonase is about 75% less than you can get at a pharmacy. Kirkland brand Claritin is ridiculously cheap, 365 tablets for under $20.
Why is gross profit margin relevant here? Are the other expenses at Costco not related to their business?
Their profit margin is 2.5% or less for 15+ years. Seems more accurate to use that number, which is also nearly equal their membership cost * number of memberships.
I still don't see the relevance - couldn't the higher gross profit margin be accounted for by having a markup of only slightly above zero, but supplemented by membership fees?
Not sure why this is getting downvoted. It’s 100% true. Their profits primarily come from membership fees. I believe their markup is capped at a maximum of 15%.
"Their profits primarily come from membership fees."
I've seen this quoted repeated but it's not a useful lens.
While Costco's annual revenue from membership fees is approximately equal to Costco's annual net profit, memberships are only valuable because of the additional services and products Costco offers, which also incur costs and contribute to their overall profits.
So it makes no sense to consider Costco memberships a product with close to 100% gross margin, which is what people normally mean when they say profits primarily come from membership fees.
One of the primary reason I love Costco is fewer SKUs.
I don’t have to decide between 20 items of same kind, say white bread. There’s usually 1 or 2 of a kind, generally of great quality. You buy it and move on.
We rely on Costco buyers to do the quality due diligence for us.
Also, even if their price is not the best for an item, I trust it’s good enough. Couple that with their return policy, most purchases become a simpler exercise.
Yea this is great. It sucks going into a supermarket and having to choose between nine different brands of tortilla chips. I mean, come on, store. Just sell the best (least expensive balanced by quality) one and don’t stock the rest! I know. First World Problem.
The bulk goods tend to be cheaper at Costco than my local stores whenever I've price shopped them. Bounty Paper Towels are about 5-15% cheaper. Kirkland butter is 10-20% cheaper than my local white-label. Kirkland unsalted nuts is 30% cheaper than white-label. I'm sure not everything has that much of an effective discount. Fresh fruit is roughly the same price. It can make sense to purchase bulk nonperishable products and food items you know you'll use before they go bad.
For most non-perishables it’s the most time efficient in minimizing the number of trips. Also given how often I go, ~once a month, each time I get the same sort of novelty as a Trader Joe's for they will have swapped out many items.
In this context, change in nominal profit is not a relevant number, but the change in profit margin could be. Which is up from 1.5% to 2.5% since 2010. Which is not earth shattering, but the slow and steady increase does indicate they are on the right track for operational efficiencies and offering a competitive product relative to its price.
We’ve got a costco and an Aldi in the same parking lot. Between the two we rarely have to go elsewhere. To the point of the OP, I think Aldi by itself is bringing down the average size of stores. Great European quality stuff at ridiculously low prices
What if you need more cultural foods? Costco and Aldi only have very generic foods. Costco has the odd frozen food and snacks from other cultures, but otherwise it's just a lot of run-off-the-mill type food.
Good point. My comment was mostly about “essentials”. If your “essentials” includes Asian or south-Asian essentials then we have those too and love going there almost as an excursion. And those stores are also small, to the OP.
I don’t shop there myself but a couple of visits tagging along with a shopper I was impressed with their bread section - head and shoulders above the typical supermarket bread. But looks like you bake your own bread (which is awesome).
Interesting you mention croissants. That bread is my litmus test of a bakery. Costco’s croissants are quite good for a supermarket outlet (and that price is amazing). Their baguette is also not bad.
Until there's a valid reason to subject myself to being in the same space as other shoppers, I'm okay sticking with the online alternative most shops provide these days. A few of the local businesses I regular closed up their physical storefront during the pandemic to focus their limited resources on online service and delivery. Rent ain't cheap.
I think anything without more data for context seems "profound."
Compare with pre-Walmart US for a huge shift in size. There were some large stores before that, but they weren't as prolific as Walmart. Or as successful in closing smaller competition.
Most stores even warehouse stores if you go at opening (assuming you have the luxury of doing so) they are particularly uncrowded except on days prior to Thanksgiving and Christmas. I used to shop at 24 hour groceries after 10pm but the covid-19 pandemic stopped every grocery (plus consolidation under Safeway) in my area from doing that.
My prediction is that we'll see a massive rise in manufacturers selling directly to consumers as e-commerce companies disintermediate traditional retailers. There's so much margin compression and headache to be captured if you can enable manufacturers to go around the big box stores of the world.
There has already been a dramatic increase in the number of manufacturers selling directly to consumers over the past few decades, both online and via manufacturer-controlled retail stores. Look at brands like Nike, Adidas, Microsoft, Apple, Le Creuset, etc.
There are exceptions. The Niche Zero coffee grinder is direct from manufacturer but is high quality.
In addition a lot of what they sell in stores is crap. To the point I would go online to find the same thing to get better quality. The caveat being caveat emptor: DYOR.
Compared to an unknown, yeah, the store brands at Walmart and Target do communicate some reasonable minimum level of quality.
I think Walmart does a better job of it than a lot of smaller grocers. "Great Value" whatever will be pretty cheap (in terms of both cost and value), but it won't be garbage in a package.
Shoes are the one thing I’ll go to a store for. It’s a real struggle to find a good fit, and there’s some manufacturing variance, even with the same model
That’s a choice of the retailer or manufacturer though. Whether it is sustainable is their problem. My wife buys 20 outfits and returns 19 of them. If the clothing manufacturer is really throwing them away then they are very wasteful.
I’m sorry I was ambiguous. I didn’t mean “unsustainable” in the ecological sense (though I think that’s true as well). I meant that free returns, especially but not only in clothes, is expensive and of course is baked into purchase price.
For some reason brick and mortar shops can resell the product (and often reject returns if not) while e-commerce do not. I feel like Amazon pioneered this for the same reason clothes sellers do, but Amazon is so dominant it could be clouding my memory.
In any case, I think the inexorable downward pressure on pricing will make the overpurchase/free return in clothing too expensive, and it will be dropped. Amazon famously cuts off customers who return too much: https://finance.yahoo.com/news/amazon-permanently-banning-cu...
Thinking this through out loud... I think there's a difference between trying on the clothes in the store vs. buying online, trying on, and returning.
I bet the retailer has much lower confidence that the clothes weren't compromised in some way. They have significantly less control of the situation. There's only so much wear and tear or damage that a regular person can do to clothes during a short session in the dressing room.
I'd love to hear some stats from the inside on the condition of the clothes bought online that are returned.
Not so much about sizing, but fit. Support around the heels and arch, flexibility but without slippage. Depends on how much you care, and what you're used to as well
I hope so. There is one more middleman we need to kill. People buying stuff off alibaba, adding their logo/branding to it and selling it for a "first world price".
I want to pay what the people in china is paying + cost of shipping/handling.
That's why you have to pay the "first world price" you were complaining about above. You can't have it both ways: either pay the first-world price and get curation/accountability, or pay the direct-from-China price and get neither.
I'm sorry, I don't understand. You can get the direct-from-China price by shopping on aliexpress.com. There's no curation, there's tons of copycats (they probably come from the same factory though), the quality is all over the map, returns are generally impractical, but the price is cheap. Or you can buy made-in-China stuff locally and pay the first world price, but there's some curation and accountability there.
Yet I see a bunch of older brands that started direct-to-consumer eventually succumb to retail temptation, probably due to lower customer acquisition costs and bulk shipping:
I think Purple mattresses showed up on a shelf at Costco last week. I don’t know how many they can sell in small sealed boxes (do they explode like inflatable rafts?) without a demo unit.
I’ve been to countries in Europe and in my experience the shops are much smaller than those in the US. “Supermarkets” are only slightly larger than your average mom-and-pop store in the US, and they have “hypermarkets” which are only slightly larger than your average US supermarket.
It really varies by country and if you are in a city or not. There isn’t a European model, you will see lot of variance between Portugal, Germany, Greece, etc.
Makes sense. More and more clothing brands, for instance, have a growing number of "online only" items. And stores that used to have an entire wall piled high with many hundreds of pairs of jeans, now carry maybe 50 pairs -- enough combinations to see what each style is and figure out your size, but for your exact style and size combination, you'll probably need to order online.
15 years ago I'd be annoyed when a store was out of my size. Now I literally don't even care -- I'll grab it online and that's one less bag to have to carry home.
There still isn’t a satisfactory answer to what will happen to all this vacant commercial real estate. The situation isn’t going to improve in the long term, so it makes no sense for investors to hodl all this vacant land and make no use of it
I’ve read opinions, perhaps presented as facts, that transforming commercial buildings into residential units was often more expensive than tearing down the whole building and starting from scratch.
If that’s true, there seems to be a large opportunity available to those who can figure out how to transform those buildings in a way cheaper than what’s currently possible.
Main issue with office space to apartment conversions is the deep floor plan that makes access to sunlight difficult. Retofitting plumbing and isolated fireproofing probably adds more complexity. In terms of malls though, it's perhaps less of a problem to turn these into low-rise residential.
But at the end of the day, it's just land waiting for re-use. I'd be happy for these spaces to become parkland and forest. Or maybe there will be something in the future that needs a lot of land but benefits being located somewhat closer to populations?
I seriously doubt that it's possible, unless you can get the city/state to change the building codes dramatically for the worse. Residential units need various things that commercial buildings don't, like windows (for each unit, not just at the periphery of the huge building), lots of plumbing so everyone can have a kitchen and bathroom, etc. Retrofitting buildings (to be very different than before, not just changing some fixtures and keeping the overall design intact) is generally more expensive than just demolishing and building new ones that are properly designed for that purpose. Just look at cars: even restoring an old car costs a fortune in labor costs, because it's far less efficient than building a new one on an assembly line, and that isn't changing the car design substantially. Imagine what it would cost to transform a 1950s car into one that meets all 2023 safety and emissions standards; even if you can reuse an existing engine/transmission, there's a ton of custom work needed, both mechanical and electrical.
The experience of having such a low-dimensional search is terrible. I feel like such an uninformed consumer stepping into stores, at the mercy of whatever happens to be on the shelf at whatever price happens to be on the items that day. In many ways its harder to assess online, but the range of goods I can look through is huge. And its easier to read reviews and what not.
I personally have changed a lot in 20-30 years. Growing up, it was extreme culture shock moving not really that far in America, from no-place in particular to a suburb of a decent sized city. I have struggled to comprehend how indoor shopping malls, filled with so many goods and so much staff, make a profit. Trying to guess at how much had to be bought & consumed to keep such an inefficient system going scared me. The mall still boggles my mind, and I'm still mildly afraid of it, but these days I also kind of fear for what happens next if we do lose in-person consumerdom. It would be shocking to me to see this institution fade, for the in-person shopping experience to thin out.
I go to stores so seldomly that it is jarring when I'm in one. I do not think I am unique in that regard-- even my 70-year-old parents have wholeheartedly embraced online shopping.
This could simply mean that the largest chain stores have gotten much larger, driving the small boutique stores to shrink, while the mid-size stores vanish.
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[ 2.0 ms ] story [ 159 ms ] threadPhysical locations have an opportunity to discover and create new meaning for customers in person
The phenomenon that cracks me up, tho, is retail stores serving as points of return for Amazon! Kohls is so damn thirsty for foot traffic they’ll accept returns for a direct competitor!
CVS and Autozone I kind of get it. If you need a prescription or hemorrhoid cream or a car battery you’re probably not waiting on Amazon… but when literally everything in your store is also available on Amazon?
Tick tock, business model.
With reputable retailers one doesn't have to worry about getting a fake item, unlike Amazon. And if one really wants a QOWXYZ brand product, it's half the price or less on AliExpress or Temu.
Amazon seems to be in a place where they're getting harder to trust every day, but way more expensive than the dubious direct from China sellers.
LOL I’d love to be a fly on the wall during those discussions at Amazon about why the hell they are allowing those “brands” in their marketplace. I mean, does anyone actually think they are legit? But then again people must buy them and they must make money for Amazon. What a circus!
I don't know if there's a solution. Nearly every place online is inundated by advertisers trying to game the system, and they ooze further into the corners with each passing month.
Reviews can definitely vary - but your perspective is probably useful to other people seeking the kinds of reviews you do
As a highly specialized retailer looking for a very small space, it is incredibly difficult to find. Commercial property owners would rather keep their store fronts vacant than deal with 10 small shops instead of 1 big one.
Something needs to change.
Contracts are social constructs. Those are bad to base the fundamentals of a philosophy on.
People like Warren Buffett and Charlie Munger are / were far closer to sound / faithful capitalists than most seem to be, lately:
https://www.nytimes.com/2019/05/05/business/warren-buffett-c...
But, one can go further, IMO:
https://link.springer.com/article/10.1007/s10551-020-04521-5
Those who stress the idea that "greed is good" set themselves (and, unfortunately, the rest of us, as well) up for misery and the kinds of instability / inequality / tightrope walk that may culminate in events like the Reign of Terror (one example that always comes to my mind, at least - a la Les Misérables, for example [but, so much more than 'just' that theatrical version of events]).
* ~3 hours ago - and, not a common thought at all for me (though thinking about economics in general is common)
Yeah? Apart from "fiat", that's been true in many places for a very long time. Why does "fiat" make it different?
Societies with working classes didn’t have working-class elders. They had old workers. Poor, old workers.
Some retailers actually intentionally make the stores overwhelming and disorienting since they believe that it increases sales.
I worked at Walmart for one summer during my undergrad. We had to re-shelve a ton of items, moving them from one aisle to another. It made no sense to me. I asked the manager why we are doing this and he said that moving items from one location of the store to another forces customers to stay longer in the store and walk through more aisles while they search for the item that they want. They actually want to make it slightly difficult to find something since it forces people to spend more time in the store. The manager said that the data shows that the longer people are in the store, the more that they buy, so they try to make people spend as much time in the store as possible to increase the likelihood they make an "impulse purchase".
(Granted, this seems to confuse correlation with causation, since time in the store isn't directly leading to people buying more stuff. Surely people who buy a lot of items take more time to get the items, but I personally think forcing people to wander around the store is mostly going to just annoy people, myself included. That said, there is apparently a large enough percentage of people who may buy more because of this, and some retailers make that apparent tradeoff to increase sales.)
Costco being a prime example. Not sure if all of the stores are laid out the same, but the ones I've been into can generally be described as "make it through a gauntlet of novel, ever-changing stuff that attempts to lure you into impulse purchases on your way to the back of the store, where the staples you came for are located, then make your way back to the front of the store, though another orgy of consumer products, and hey, you've already said no to the fleece vest and the shrimp shu mai so you might as well treat yourself to the 3 pound jar of chocolate caramels".
or so I've read, heard or maybe made up some fiction
EDIT: I'm not alone. Revenue is up more than 50%, and profit more than 60% in 5 years at $COST. [https://valustox.com/COST]
Basically, when I buy something at a regular store, I'm shocked at the recent inflation.
But at Costco, most things have barely budged at all in the past few years. And that's starting at a lower base as well - at the moment it's simply nuts how much cheaper things are there.
In fact, if you look at their financial statements, their entire profit equals their membership fee income - this means you're buying things at cost price on average. And Costco is known to be brutal to their suppliers, using their market position to force lower prices and larger pack sizes onto the manufacturers.
They don't sell everything though - there are some items you have to buy on Amazon or a regular grocery store. But almost (not entirely) every time that Costco sells something, it's the best deal you can get.
Another downside is you have to buy a LOT of what you're buying. So it only makes sense if you're planning ahead somewhat, and if you have room in your fridge/freezer/garage.
EDIT: actually the main drawback is the hugeness and remoteness of the store, and the immense number of other shoppers. But again, this plays into going every couple of weeks and buying ahead. These things are inherent in their model and I accept it. I actually spend less total time shopping now because I do all of it in 60-80 minutes every two weeks.
Another edit: none of this means that the quality is any lower. Somehow, they're delivering excellent meat, produce, and more at a fraction of the cost.
Maybe I should buy shares in this company. They barely have a profit margin though.
Below average is fine, you just want to avoid horrific.
E.g. I needed a shredder. There were two, a smaller one and a bigger one. I got the smaller one without needing to think or comparison shop because I know it will work for me (absolutely no issues in 6 years) and it's a decent to great price.
On the very rare occasion I get a dud, they happily take returns. Last winter I returned a two year old fridge and they didn't even ask for evidence of my issue
What city has one downtown?
I currently spend the same there every month as I did 5 years ago. Inflation has barely touched it except for a few items like beef and fish, which have recently come back down in price.
I don’t understand the complaint some people have that it’s hard to shop there because quantities are too large. I use everything before expiration and end up throwing away very little. For short expiration item like meat, just use your freezer.
Not quite.
Costco's gross margin is ~12% of revenue. That means their average markup (including revenue from membership fees) is over 10%. If membership fees are about 2% of revenue, and other income (e.g. commission from the vendors near the exit), then Costco's markup is in the 8% to 9% range.
If we were buying things at cost price on average, then Costco would not have enough money to pay for rent, staff etc.
If that's the case, then you could do even better: don't shop at profitable retailers. Only shop at places with really low net income. Better still, shop at places that are so badly run that, even though they have high gross margins, waste so much money on overheads that they lose money overall.
(I'm not suggesting Costco is poorly run, or is a bad place to shop. Just trying to illustrate why focusing on total costs instead of COGS can lead to absurd conclusions.)
What does low net income have to do with anything? Profit margin tells you how much the middleman is keeping. The lower the profit margin, the lower the prices, for something as fungible as retailing consumer goods.
A business needs at least a minimal profit margin to survive a little volatility. That is why Walmart/Costco/Kroger have 2% profit margins. If anyone could deliver those goods for cheaper, they would, but they probably cannot as evidenced by competitors going out of business.
>Better still, shop at places that are so badly run that, even though they have high gross margins, waste so much money on overheads that they lose money overall.
Businesses that lose money tend to get shut down by the owners, since people generally do not like to lose money.
Please read the comment to which I was replying. My whole comment was written to explain why we shouldn't focus on net income, and instead focus on COGS. You're making the same point I was.
A pint of pure vanilla extract for $9.99. Dog treats at about half the price of pet smart or online stores. Kirkland brand Flonase is about 75% less than you can get at a pharmacy. Kirkland brand Claritin is ridiculously cheap, 365 tablets for under $20.
You very rapidly get back your yearly fee.
Annual inventory turns: about 12x. (1.5x as fast as Walmart.)
Their profit margin is 2.5% or less for 15+ years. Seems more accurate to use that number, which is also nearly equal their membership cost * number of memberships.
I replied to a comment that said Costco has "barely any markup".
Markup and gross profit measure exactly the same thing. If you know one, you can calculate the other.
A gross profit margin of 12% means Costco's markup is over 10%. (Or 8% to 9% if you don't count membership fees.)
This is low, but it's not nothing.
I've seen this quoted repeated but it's not a useful lens.
While Costco's annual revenue from membership fees is approximately equal to Costco's annual net profit, memberships are only valuable because of the additional services and products Costco offers, which also incur costs and contribute to their overall profits.
So it makes no sense to consider Costco memberships a product with close to 100% gross margin, which is what people normally mean when they say profits primarily come from membership fees.
Ironically the bulk store brands also tend to be higher quality. The downside is there’s less variety.
I don’t have to decide between 20 items of same kind, say white bread. There’s usually 1 or 2 of a kind, generally of great quality. You buy it and move on.
We rely on Costco buyers to do the quality due diligence for us.
Also, even if their price is not the best for an item, I trust it’s good enough. Couple that with their return policy, most purchases become a simpler exercise.
Take Fresh Del Monte - I know they do more than just fruit, but their margins are tiny. [https://valustox.com/FDP]
South San Francisco has a Trader Joe's right behind a Costco parking lot: https://goo.gl/maps/ZakBe7FENqr1ybRm9
Not quite as good as an Aldi, but close.
- croissants ($5.99 for 12)
- artisan burger buns
"The average store size in the U.S. is the smallest it’s been in at least 17 years, reflecting profound changes in the way Americans now shop."
I'm also struggling to understand why this is "profound". Things change, business adapts. life goes on.
Compare with pre-Walmart US for a huge shift in size. There were some large stores before that, but they weren't as prolific as Walmart. Or as successful in closing smaller competition.
On the one hand, going over the top of big box allows you to establish a direct customer relationship and keep profits.
On the other hand, it removes the quality imprimatur that being stocked in a big box confers.
Ceteris paribus, why take a risk on one of 1,000 new internet brands, when you know better what you're getting with a megabrand?
Which is probably why you see internet brands succeed best in the disposable space (e.g. fast fashion), where quality is not a differentiator.
In addition a lot of what they sell in stores is crap. To the point I would go online to find the same thing to get better quality. The caveat being caveat emptor: DYOR.
I think Walmart does a better job of it than a lot of smaller grocers. "Great Value" whatever will be pretty cheap (in terms of both cost and value), but it won't be garbage in a package.
For some reason brick and mortar shops can resell the product (and often reject returns if not) while e-commerce do not. I feel like Amazon pioneered this for the same reason clothes sellers do, but Amazon is so dominant it could be clouding my memory.
In any case, I think the inexorable downward pressure on pricing will make the overpurchase/free return in clothing too expensive, and it will be dropped. Amazon famously cuts off customers who return too much: https://finance.yahoo.com/news/amazon-permanently-banning-cu...
They are supposedly trying cut the returns cost: https://www.cnbc.com/2022/04/10/how-amazon-plans-to-fix-its-...
Apparently the term is “reverse logistics”: https://www.newyorker.com/magazine/2023/08/21/the-hidden-cos...
I bet the retailer has much lower confidence that the clothes weren't compromised in some way. They have significantly less control of the situation. There's only so much wear and tear or damage that a regular person can do to clothes during a short session in the dressing room.
I'd love to hear some stats from the inside on the condition of the clothes bought online that are returned.
I want to pay what the people in china is paying + cost of shipping/handling.
Isn't this already the case with electronic intermediaries instead of brick and mortar ones?
Buying an iPhone from Apple: direct
Buying an iPhone from Amazon/Walmart/Target/BestBuy: not direct.
* Harry’s razors are now at Target and Costco
* Casper mattresses at Macy’s
* Allbirds sneakers at Nordstrom Rack
15 years ago I'd be annoyed when a store was out of my size. Now I literally don't even care -- I'll grab it online and that's one less bag to have to carry home.
If that’s true, there seems to be a large opportunity available to those who can figure out how to transform those buildings in a way cheaper than what’s currently possible.
Main issue with office space to apartment conversions is the deep floor plan that makes access to sunlight difficult. Retofitting plumbing and isolated fireproofing probably adds more complexity. In terms of malls though, it's perhaps less of a problem to turn these into low-rise residential.
But at the end of the day, it's just land waiting for re-use. I'd be happy for these spaces to become parkland and forest. Or maybe there will be something in the future that needs a lot of land but benefits being located somewhat closer to populations?
I personally have changed a lot in 20-30 years. Growing up, it was extreme culture shock moving not really that far in America, from no-place in particular to a suburb of a decent sized city. I have struggled to comprehend how indoor shopping malls, filled with so many goods and so much staff, make a profit. Trying to guess at how much had to be bought & consumed to keep such an inefficient system going scared me. The mall still boggles my mind, and I'm still mildly afraid of it, but these days I also kind of fear for what happens next if we do lose in-person consumerdom. It would be shocking to me to see this institution fade, for the in-person shopping experience to thin out.