[Some anonymous poster asked me to crosspost this musing here. I don’t know grocery store economics, but if someone does, explain where I’m wrong, please.]
I was at Food 4 Less (or was it El Super), watching people bag their own groceries. What would it cost if someone was there to bag them, I wondered?
Let’s say it takes 5 minutes to bag a cart of groceries. So a worker can do 12 in an hour. They do this for, let’s say, 7 hours a day. There’s a half hour of breaks, and a lunch break, and meetings, so that’s why I say 7 hours.
Let’s suppose this bagger makes $12 an hour, which no bagger makes, but, let’s suppose. There’s taxes and other expenses like insurance, so, let’s say that they add 50% to the cost of hiring this person – $18 an hour, or $144 a day. That wage, spread over a day’s worth of groceries, is only $1.71 per cart.
Anyone who shops at bag-it-yourself supermarkets knows that they are a lot cheaper than the ones where they bag it for you. Everything is cheaper, and in my experience, you can save a lot of money. Certainly more than $1.71 per trip.
So, why don’t they just increase prices by 1% and hire a bunch of baggers? They would create some entry level jobs.
I suspect that it’s because the owners want to create a distinction between stores. You have Food 4 Less, and you have Ralphs, both owned by Kroger. Food 4 Less costs a lot less than Ralphs. The main differences between the two is the bagging thing, slightly more “gourmet” inventory, and “atmoshpere”.
“Self-bagging” has become a symbol of poverty, or at least of thriftiness. Conversely, not self-bagging. having a kid or the cashier bag them, has become a status symbol. By perpetuating this division, Kroger can increase profits at Ralphs.
There’s also the whole paper, plastic, or canvas issue. I know it’s not green, but I get plastic, because that’s all they offer at the self-bagging. I use the bag instead of plastic wrap when storing food.
Unemployment is high, especially in working class communities. What Kroger and other grocery companies with self-bagging stores, like Albertson’s Max Foods (and a Luckys in Alhambra), should do is add bagger jobs, and keep their prices low. Prices need increase only 1% to 2%, if they create $24,000 per year jobs with full benefits, and have the baggers do 12 carts an hour. The profit margins are there, so, the money’s there to make the job.
Realistically, they should be able to do this without raising prices at all, by paying minimum wages and full benefits, and making them do more carts per hour. That’s usually how they do it, because bagger jobs are the low-paid positions.
I used to work at Esclavo Joe’s (Trader Joe’s) and many thoughtful customers would self-bag. That’s helpful. Especially when the whole top of the cashier surface is overflowing and they’re just staring at me with their arms crossed. And you can easily BRING your canvas bag to your SELF-BAGGING market. Es re-facil!
I have issues going to Food 4 Less for the very reasons pointed out in this post. Working at a grocery store at least in California was a union job. It was a job that made good money. At one time I remember Food 4 Less wasn’t union, though I know Trader Joes isn’t either, but TJ seems to pay their employees and their employees seem to enjoy their job, but Food 4 Less, I didn’t see that joy. I assumed it had something to do with them making only a little bit of money.
I am always conflicted in these kinds of matters, I hate the whole corporate thing, but I know corporations at one time gave people who didn’t no how to start their own business, couldn’t get loans to start their own business a leg up. I was dying for coffee the other day. I was at the Rosa Parks Blue Line Green Line station. I walked all the way around and then around a gate so that I could find coffee. The only place available was McDonalds, but when I went inside I saw young people working there and at that moment and I know this is very stupid and obvious, but at that moment I realized why working class neighborhoods love it when big box stores move in. Jobs. A mom and pop shop can’t put a dent in the need for employment in neighborhoods where the unemployment is in the 25% range. And while alot of these jobs pay very little it is something and being able to make a little money as a young 19 year old or 20 something year old puts you on a different track than never having a job at all.
When I went to McDonalds, this young man was so happy. He had such great customer service, better than at fancy gourmet coffee places.
Browne
I use to bag groceries for Ralphs in West LA for two years to put me through school. let me tell you, its one of the worst fucking jobs ever. it made my job even harder when they have $200 worth of groceries & want it all bagged in paper. try bagging during thanksgiving haha. The union doesn’t really help you unless you started working before the last strike. Everyone who started working before the strike gets a ton of union benefits & make at least $20-30 an hour. I on the other hand came after the last strike so I could never make $20 an hour like everyone else.
Its funny how all these rich West LA snobs would come in & think using canvas or paper bags all of a sudden makes them green. I’ve been green all my life by recycling cans/bottles & taking the bus everywhere. I dont do it because I want to, I do it because I have to.
sorry for rambling haha.
From the mouth of the right wing Economist Magazine.
“Americans worried that cheap labor in far away countries threaten jobs at home should re-direct their gaze to the mirror . . .”
http://audiovideo.economist.com//?fr_story=c4a5c5ebf8c7b5edf534b7067cea16dc72f7fbcc
a bagging job is great for a kid, or some one going thur shcool these kinda of jobs are important and its nice to have something else besides flipping burgers for kids to work at.
Browne,
I was having that exact same conversation with friends recently. I too am pretty conflicted about the corporations, but see the benefits of big box stores in certain areas.
In an economically depressed area like where I grew up, if I had to choose between a Wal-Mart supercenter, and a more boutique type grocer like Trader Joes, I would have to choose the Wal-Mart. Yeah, it’s an evil corporation, but it provides hundreds and hundreds of low skilled jobs compared to a small number. It makes a dent in unemployment, it brings a little money.
And like you suggested, it can be up to the people themselves if they want to resign to that low level work with crappy benefits, or use it for a stepping stone to something much better, maybe even independent.
I can see the value of having mere jobs available. But it’s unfortunate that we sort of collectively, as a nation, have accepted low wage jobs as a substitute for living wage jobs. I’m going to get a little conspiratorial here…but long term, this was their plan. They wipe out the unions, and suddenly people are just happy to have a McDonalds in the neighborhood, hiring people for minimum wage that could have been earning $20/hr, 30 years ago at one of the factories that have long since been phased out. I remember reading this letter to the LA Times editor a few years back in the paper, where some business guy said that the sagging economy was the best thing to ever happen to him. He said that at first, he had to lay off most of his workers. Then, a year later, he was able to hire employees with the same skills at much lower wage, because they were so desperate to get a job. To this day, I think a union exec wrote it as sort of a joke, to get people to think about the mentality that the big companies are using. From one end, it’s great that there’s jobs. But from another end, people have to realize that they’re worth more. Somebody has to dig the ditch, therefore, the people digging the ditch have a lot of leverage in a country where organized labor is legal! This is the philosophy of every great union leader like Cesar Chavez. As an anonymous commenter said on another blog today….who do you think fought for the minimum wage, people working cash registers at Burger King? Unions did. Unions get decimated in this country, I believe the minimum wage, and basic workplace rights, will be next to go. Again, who will fight to keep them? Politicians, most of whom are in the pockets of big corporations? Ha.
You know journalism is a union job. The people at the LA Times, NY Times etc… they are union.
Now we have blogs. In the beginning blogs were more political you had people writing their opinions. Now the bigger blogs if you look behind them are run by people in PR, entertainment etc…pretty much jobs that are part of the corporate machine. And now many of these corporate blogs that have advertising have people writing for free or very little. Huffington Post, what the hell. Why can’t Arrianna pay people? You even have entities like CNN asking for people to give them stories and video FOR FREE.
I don’t think professional people thought that their pay could ever be impacted, but it kind of looks like it did. I obviously have no problems with blogs, but I do have a problem with how the art of writing has been turned into this thing that anyone can do for free and now people who used to get paid are expected to work for free and not only that if you want to make money with your blog you are viewed as a sell out, but writing is a job. The only people who can write for free already have jobs at big PR houses so their free writing isn’t really free writing and the others are well taken care of via cushy jobs probably got through their connected parents or because they are more historically well off and they think it’s a fun hobby.
Hell on my blog I will pay you if you write on a consistent basis. If I can pay people why can’t Arianna Huffington?
Browne
Bagging groceries and bringing your own bag was part of every grocery shopping experience I had in Europe. If you didn’t have a bag even at the lowest of discount grocers you had to pay for one. In Oregon, someone gets paid to pump your gas.
Less menial work and more meaningful life.
I hated bagging groceries boooo, and I was there before the strike the Union did not do much. The only thing that was good was the benefits I got braces really cheap.
Rob: there’s room in the profit margin to pay someone a living wage to sack groceries at Food 4 Less.
The reason why unions are shrinking is only partly due to de-skilling and automation. The unions should have started organizing people getting these de-skilled jobs, as well as the higher-skill jobs, like repair techs and computer administrators. They didn’t.
Wal-Mart and McDonalds are organized in other countries. Skilled technicians are organized in other countries. Retail workers are organized in other countries. They’re just not organized here, and it’s basically because unions aren’t making the decision to organize these jobs.
Two exciting union stories out there are Starbucks workers, and the Republic Windows workers. They’re being organized by the IWW and UE respectively – two unions that are not part of the AFL-CIO or Change To Win.
UE, in particular, is interesting, because they broke the law to win. It’s illegal to do a sit-down strike, but that’s exactly what they did. The IWW is interesting, too, because I believe they’re still classified as a terrorist group, and affiliating with them causes you to lose protections under the NLRA, because there’s a clause in there that says Communists are not protected under the NLRA.
The times have changed. People think of the UE strikers and the Starbucks workers union as heroes. Heroic labor leaders for this millenium have to be lawbreakers and so-called terrorist communists. Just like in the past.
alienation, the problem is that too many people wait on “the union”, as if the union is this separate entity out there. The right to unionize is in the law. It’s a basic workplace right in this country. A union is only as good as its activism at the lowest levels.
The biggest disappointment I see today with union members are the older members, nearing retirement, brushing aside any activism or “rebel rousing” to avoid jeopardizing their retirement. While it makes sense, it’s kind of a chicken shit thing to do considering that their retirement was only made possible through the sweat and blood of earlier generations doing some serious rebel rousing! A lot of the baby boomers nearing retirement are voting “no” on strike votes, just to not rock the boat. They’re thinking of themselves, period, and have no concern for the younger union members who will get fucked with multi-tier systems resulting from a lack of a strike or any union resistance.
profit margins from some major supermarkets, taken from their latest annual reports. unfortunately, trader joe’s is private, so their info isn’t readily available.
safeway (vons’ owner): 2.2%
whole foods: 1.4%
kroger: 1.6%
supervalu (albertsons’ owner): -6.4%, 1.3% in 2008, when they turned a profit
wal-mart: 3.3% (possibly not indicative since food is a much smaller part of their overall business than the above)
and, one non-local chain, just for kicks.
winn-dixie: 0.17%
What Wal Mart has done, human, is brought down the profit margins of those grocery stores who specialized in groceries. Those percentages had to have been much higher 20 years ago, with Wal Mart’s being lower. As theirs got high, the others dropped. Wal Mart good for America? You be the judge.
rob, i’m making no comment on wal-mart other than that they aren’t purely a supermarket. their profit margin is not necessarily reflective of the grocery business in general. as for profit margins 20 years ago, i couldn’t quite get back to 1989, but here are some more numbers.
safeway, 1992: 2.9%
whole foods, 1992: -0.48%
kroger, 1991: 0.48%
albertsons, 1992: 2.9%
wal-mart, 1993: 3.6%
winn-dixie, 1992: 1.9%
taken from edgar online from the oldest annual reports on record for each company.
I was talking about Wal Mart’s effect on the rest of the industry. According to your numbers, they knocked Albertsons right out of the stratosphere, and a lot of union jobs along with them.
True, the people are apathetic, but, during the unions’ heyday in the 30s, the organizations made efforts to sign people up. Tens of thousands of new members were signed up every month.
Right now, the big impediment to growth, imnsho, are the laws. There are a lot of steps involved to establish a union. Back in the 30s, to join up, people would go to a CIO office and get a card. Then, they’d be directed to a union, which would then try to organize their workplace (if enough people were interested).
Today, the national office does research on different industries, and decides how much effort to dedicate to organizing an industry. It creates a strategy, and then the locals implement it, focusing on specific companies or sectors. Desperate workers who seek help from the union, may be ignored if they don’t fit into the national strategy. It’s very top-down.
Anyway, WRT to this talk about supermarket profits — we’re ignoring a couple key points. First, the profits are calculated after the management salaries are deducted, so, of course profits are going to be small. The Wal-Mart profits could be even smaller, but, they make so much money in the stock market that there’s probably a Wal-Mart stock bubble right now, and they’re perpetuating it. Pundits like to say it’s because Wal-Mart is so efficient, but, I suspect it’s also exploitative.
Second, groceries are necessities. So is a job and income. You can always raise prices a little bit, if it means you can create a reasonable job with a decent wage. For a less than 1% increase in food prices, you can create a lot of $12 an hour bagger jobs with full benefits. The potential to do this exists, because of the self-bagging stores.
These shitty bagger jobs would pay more than every single entry level Wal-Mart or Target job in the country, more than every single non-management fast-food job in existence in America. There would be huge lines and stacks of job applications for these jobs, if they existed. It would raise the standard for shitty jobs, and support good wages in the better jobs.
People can afford the price increase. I see people buying chips, sodas, beer, pop tarts, cooked chickens, and a lot of other expensive things, at these big stores. Usually, I’m one of the minority who buy mostly vegetables and staples like flour and rice. The prices are pretty low, and even after an increase, they’d be less than Ralphs or Vons.
It’s just something to trip out on, if you happen to shop at Superior, El Super, Food 4 Less, Lucky, or Max Foods (if they still exist).
alienation, I’ve talked to a couple of Wal Mart employees. They’ve told me themselves that most wal mart shoppers are not shopping there to save money or “stretch their dollar”, they’re just buying more junk food for the same price they’d pay for their normal groceries at a regular grocery store. Wal Mart has been an overlooked suspect in America’s obesity problem. We’ve blamed fast food, but while fast food places “super sized” American diets, Wal Mart was attracting customers to their junk food factories, as well.
Absolutely agree with you about unions. It’s hard to form a union. I was more so referring to people already in a union, upset that they’re being under-represented. It’s on them to take their union leaders to task. I’ll say again, a union is only as good as its activism at the lowest levels. If there’s no activism, union workers are just being screwed by two companies instead of one.
The best example I could give of an active union: Police unions. On the f’n ball. They’re on their union leaders like stink on shit. Not only do they make it clear what they want, they make sure to have good p.r. to refute the opposition ads that paint them as greedy. Sacramento sheriffs just put out a brilliant ad detailing the concessions they were willing to make. The grocery unions never did that in their strike 5 years ago. The companies painted them as greedy, the union just called them greedy right back. Most of the grocery clerks were willing to sacrifice some of their wages and pay a little bit higher of a co pay, but the union insisted no. If they had more control of their union, and put the p.r. out that they were willing to take a little off their wages, they would have won that strike. They’d still have their old step up system, instead of the two tier they have now. That was the most important thing.
My husband used to bag groceries at at store like this one (Super King) and let me tell you they all would bag WAY more than 12 carts in an hour.. it does NOT take 5 minutes to bag up a whole cart..
Even at the big stores like Vons and Albertsons I have bought a cart full of groceries before and been through the line in 2 minutes and that was with the cashier ringing up the items AND bagging them.
So I think that your calculations would actually be much, much less per cart of groceries, but I guess you were trying to be conservative 🙂 but also these types of stores are usually ALWAYS busy (ever been to Super King) so they would never have any down time where they weren’t doing as many as say, 50 carts in an hour.
If I was a grocery store owner I would not hire bag boys because it seems like a waste of money to pay someone to just do 1 small thing such as that. Now if they did various jobs such as cleaning, collecting carts, go-backs and bagging then maybe just maybe I would see it as being worth it to my business. But to add thousands of dollars to my expenses just so my cashiers or customers don’t have to bag their own groceries I don’t think I would do that.
That being said I don’t mind paying (slightly) more if it can create a better paying job. I’ve been through those minimum wage times in my life and my MIL and FIL still are.
At the “Food For Less” in Pico Rivera all the prices are not lower, I had to bag my own stuff and some items would have been cheaper at Ralph’s, I never would have thought that Ralph’s would be cheaper on some items.
rob, my data is not nearly enough to draw the conclusion you came to. using your method of extrapolation, wal-mart was a boon for (unionized) kroger, turned (employee-friendly) whole foods into a profitable venture and thrashed (non-union) winn-dixie. if you do have the data to support your conclusion, i would love to see it.
if it’s not clear yet, my only point with the numbers is that profit margins in the grocery business are very low and have been for a long time.
Kroger’s numbers didn’t increase nearly as much as Albertson’s decreased. Therefore, you’re not using the same data I used. I only came to the conclusion based on how much Albertson’s lost. The other companies’ numbers changed only moderately. human, do you honestly believe that Wal Mart had nothing to do with Albertson’s being nearly put out of business? Also, alienation put your profit margin stats into prospective. You should check it out. Interesting read.
@vince – dang. That’s good to know. Maybe Ralphs is dropping prices.
From what I’ve seen being poor costs you more. Food for Less seems cheaper, but bad quality produce and meat, spoils quicker, the cheaper price in some ways isn’t really cheaper.
Same thing with housing. It seems cheaper, but not if you calculate in the stress of maybe or maybe not getting shot, living in higher pollution sections of town, lead paint and crappy schools.
Food choices, filled with fast food joints that serve one dollar meals that give you career ending diabetes and high blood pressure.
You never save money in the longterm if you do thing that poor people have to do, because they just don’t have left over to invest on food and shelter that won’t kill them.
Browne
rob, the numbers i provided only show one thing, that profit margins in the grocery business are and have been very low. there is no “prospective” that will change this.
all further conclusions (if you read carefully, i came to none) need more data, so please provide it or at least a citation to where it can be found.
Those profits are what’s left over after the money’s been spent. Walmart has spent a lot of its money investing in businesses that the other supermarkets don’t have.
Walmart probably has a lot more money to mess with, partly because it’s more efficient, and partly because they pay lower wages and fewer benefits.
WMs studies say that WM saves shoppers 10%. I kinda doubt the savings is that big, but, even it it were, it’s still a smaller percentage than the difference in wages and benefits.
Well said, alienation.
Walmart also destroys small towns. In LA Walmart is bad because of more universal reasons. We have alot of low wage jobs here. In places in the South and Midwest Walmart is horrible, because it actually drives the mom and pop businesses out of business. It shuts whole communities down. It ends up literally being the only game in town. Imagine living in a town that used to have community based businesses and now the only thing you can do or buy is Walmart related. It allows them to even drive wages down lower. It makes little town all over the US slaves to one company. If that company decides to pick up and leave it turns the whole town into Detroit. Just by shutting down and moving away. That’s way too much power for one corporation.
Browne
Browne, did you see that documentary about Wal Mart where a former (more like, reformed) Wal Mart executive talked about how they would drive down “Main streets” in small towns that Wal Mart was moving into, point at mom and pop stores, and say, “6 months”, “one year, tops”, “3 months, maybe 4”, etc., signifying how long those stores would survive competing with Wal Mart? You just want to sock the guy, even though he’s denouncing what they did. They’re unbelievable.
I did see the movie, but I also saw first hand when I visited a small towns in various parts of the country. It shocked me how daily life was pretty much centered around Walmart. I went to a small town where half of the residents lived in trailers. They all had one place to go shopping Walmart. They all worked at one place Walmart. They were all extremely poor. It was horrible. Walmart essentially owned the town. These are little towns where people have no options. There are no community colleges, there are no colleges, there is no public transportation, once you get stuck in a Walmart town you get stuck for life. The options that exist in LA don’t exist everywhere. People think LA is bad, they just don’t know. At least here you can see an exit. It may not be accessible, but at least you can see it.
Being in a small town where there is nowhere to shop but Walmart and the next nearest town is 30 minutes away by car, driving very fast with no traffic is a mind blowing thing.
Browne
as much as i also hate wal-mart, they aren’t the cause of low margins in the grocery business. grocers have always had slim margins due to the nature of their business. you can see from the chart in the following document that profit margin isn’t a steady decline as a result of wal-mart entering and squeezing the industry, but more or less tracks the overall economy for the last 10 years.
http://www.fmi.org/docs/facts_figs/CompetitionandProfit.pdf
supermarkets have had similar numbers as the above chart for decades, going back to well before wal-mart existed.
from http://www.nytimes.com/1997/09/28/nyregion/nation-s-first-supermarket-attempts-to-stay-competitive.html?pagewanted=all,
“What has not changed since 1930, however, is the technique of buying goods in volume and, using that leverage to get a good price, selling them at a discount. From the beginning supermarkets operated on razor-thin profit margins. It is a business in which making more than 1.5 percent of gross sales is considered a windfall.”
from http://www.livinghistoryfarm.org/farminginthe50s/money_13.html, some anectdotal evidence,
“Supermarkets came in for their own share of criticism, and they responded. The big chains argued that their profit margins were extremely low, only 1.3 percent of sales. They pointed out that wages costs had shot up by 22 percent and rents and services shot up by 54 percent between 1950 and 1965.”
alienation, my point is there isn’t much room in the profit margins for much of anything if you’re a grocer. there never has been and the reasons for such are more fundamental than the influence of wal-mart, evil as they are. in fact, all this talk of wal-mart has actually distracted from the original topic, job creation. expanding unskilled work (eg, bagging groceries) in low-margin industries (eg, food stores) rarely makes for sustainable, long-term job creation.
I couldn’t agree more, human. I love Wal Mart! Me, my 10 kids, my mother, my aunts, and my grandmother pile into the truck and go once a week. It’s better than that union supermarket around the corner. You don’t have the “super 100 pack” of hostess cup cakes, we don’t shop there! It’s that simple.
@human – I must not be communicating my point too well.
The profits at all these stores are slim, though WM has 2x the profits of others. I never disputed that. Also, this site: http://answers.google.com/answers/threadview/id/204979.html : says net profits are closer to 6% than 2%.
My point was that the companies don’t take their profits and plow them into growing the business. They pay dividends.
The money that’s plowed back into the business, and into other businesses, is counted as an expense or capital improvement. The profit is the money that they have, but haven’t yet spent or distributed.
So, suppose I am a store, and sell $10,000 of product today. Let’s say that $5,000 was the cost of the goods. $2,500 went to labor. $1,000 went to insurance, taxes, rent, and other immediate expenses. That leaves $1,500 of “profit”… except if I spend the money, then, I don’t consider it “profit”.
If we kept the 1,500, then our profit margin is 15%! That money belongs to the shareholders.
On the other hand, by spending more money, you reduce your margins down to whatever you want.
Wal Mart has a real estate company. Perhaps some of the money could be invested in that company. In this way, you can reduce your reported profits.
Browne, excellent point!! Lower quality can mean a higher price in the long run!! Why drive cross town to save 50 cents on frozen peas!!!???