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There Sure Are Some Weird Beliefs Out There

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Apparently the grocery industry has no clue as to what it’s doing:

The dollar stores, with their smaller scale and selection, don’t need to pay as many workers as grocery stores, and they can focus on the high-margin packaged products, which happen to be the unhealthy ones.

That’s the journalist at Slate and obviously they’re correct because, well, they’re a journalist at Slate, right?

Here’s how the grocery industry gets it entirely wrong:

Grocery sales 55% is the highest amount of sales in a retail store format. The gross margin in grocery is typically 25% for dry grocery; 30% for grocery frozen food and 30% for grocery dairy.
Produce sales typically account for 10% of the total store sales with a 40-45% gross margin.
Meat sales typically account for 9% of the total store sales with a 28-30% gross margin.
Deli sales typically account for 5% of the total store sales with a 40% gross margin.
Bakery sales typically account for 2-4% of the total store sales with a 55% gross margin.
All in all, the more a store sells in these fresh departments, the more profit it will put on the bottom line.

How joyous, an entire industry corrected by the single journalist!

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3 COMMENTS

  1. Where does he get those numbers from? My brother used to run a corner gree’ngro’cers and never saw those sorts of margins.

  2. Presumably gross margin excludes rent, electricity, payroll, etc., so those numbers tell us nothing about profitability. They do inform (if correct) the management about where their best opportunities are.

  3. They’re higher margin because they’re higher risk – I’ll wager that these numbers are markups, not actual gross margin. Fresh produce suffers from waste – through short shelf life, because they’re more delicate from a handling perspective and because they’re more costly to run (they need to be kept in fridges etc) – in a way that dry grocery does not.

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