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Comment by PragmaticPulp | Hacker News Reader

To put this in context: Grocery starts famously have razor-thin margins because the business is so competitive.

Kroger's most recent reported net profit margin was 1.7% with gross margins (e.g. before company expenses) in the 22% range.

Compare that to the SaaS companies, where many of us collect our paychecks, that can have gross margins in the 60-90% range.

If you want to call companies out for price gouging and excessive profit margins, taking Kroger to task for a 1.7% net margin seems kind of silly. Especially when most of us engineers are collecting paychecks from companies with far, far higher margins than that.

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The socioeconomic impact of a grocery store is far more important than anything happening in the SaaS world. Towns live and die by grocery stores-- food deserts as they're known in areas that go without. It's fair to be critical of a sector with tighter margins because food is rather low on Maslow's hierarchy of needs. SaaS is expendable, food isn't.

> Towns live and die by grocery stores

Do they? Or are things like food deserts transitive symptoms of deeper problems? E.g. that the surrounding area is poor and getting poorer. If so, no amount of legislation will change that

> no amount of legislation will change that

Programs like SNAP, the earned income tax credit, subsidized child-care, and refundable tax credits for children have an immediate impact. Legislation could also provide a universal basic income.

If that's too pink a set of approaches to reduce the impact of poverty for you, governments can also subsidize development of new housing and invest in infrastructure upgrades that draw folks with higher incomes into a community. This works best if you are in a metropolitan area. In rural communities, it's not uncommon to pour great sums of money into courting large employers, giving them land or tax free status for extended periods.

Hell, if your goal is just to get a grocery store, pour on enough subsidies and someone will show up to collect that money.

To clarify: "no amount of legislation of grocery stores / the grocery industry"

The point of TFA is that this is one of the many mergers that should be rejected by regulators.

Place where I used to live shut down the main bus line in the poorest part of town. The result was people couldn't easily go to the local (small) market which then closed. The result was going from a 10 minute bus ride to almost an hour one way. The old line had quite a few stops along the way, so residents with a few bags of groceries didn't have far to walk. The new route had one stop which was placed far from the residence area.

Except Maslow was wrong.

Source?

It's incoherent to use the example of low service density as a justification to criticize a grocer for taking higher profits. You can't pursue both sides of a tradeoff simultaneously.

The more money there is to be made in the grocery sector, the more grocers there will be to compete for it, located in the places where the money flows. Likewise the leaner they have to operate, the more they'll shut down in marginal territory that can't support their business, and the more areas will go without convenient access.

If selling groceries in low-access areas for low profits is indicated by the necessity of food, then nobody is stopping you from doing it; but as the grandparent comment hinted, if you find your niche in high-margin software instead then you're following the money, just like grocers do.

Why should a company that provides no differentiated value have much of net margin (after paying for the cost of capital, in the form of debt payments which are included in company expenses)?

Kroger et. al provide no unique value - they don't have any intellectual property, they have almost zero human capital because they treat their workers terribly and have low retention. They do some stuff with their private labels but that's really it. What grocery stores doing that commands more than a 1 or 2% margin on a huge segment of the economy? If they're earning more than that it is probably and indication that they are ripping off the consumer, ripping off the worker, or both.

> What grocery stores doing that commands more than a 1 or 2% margin on a huge segment of the economy? If they're earning more than that it is probably and indication that they are ripping off the consumer, ripping off the worker, or both.

They are not earning more than that. Kroger's net margins were 1.7%. That was the entire point of my post.

You can rescue your profit margin by paying high salaries to executives and have a ton of administrative overhead. That’s how health insurance works. The profit margin says nothing about how efficient the company is.

There's nothing wrong with a healthy profit margin, per se. The potential problem here is that we have a de facto monopoly in many regions which controls access to FOOD.

If it gets too bad, that's how you end up with riots, local politicians dead, buildings torched, etc. Food riots are not something you fuck with.... If history has anything to say about that.

I don't think we've seen that scope here in the US... Yet. But given the number of guns, "it's a when, not an if" if the politicians allow extreme food scarcity to happen in a wide area.

Politicians allow? Not the business? The calls for government regulation by the same gun toteing people who constantly complain about big government is so confusing.

Correct. It matters less how healthy/nutritious the food actually is, full bellies tend to keep revolutions at bay.

Yep. The Romans figured it out over 2000 years ago.

panem et circusensus (bread and circuses)

My senical take on food stamps has been one of politicians feeding the poor to prevent reality. In the US you are talking about 40+MM people who cannot afford to feed themselves. If half of them missed a few meals all of our other problems would disappear under the ensuing sea of shit.

Is there a way in which the monopoly is causing food to be denied to individuals?

The way I see it is that any food desert either exists because it is not profitable or because nobody has taken the initiative to offer a profitable service. Obviously I could be wrong, but I have a hard time seeing how a megacorp is denying access to food.

Low margins on food is a positive thing though.

The margins on food aren't actually low; they've just been captured by Smithfield, Chiquita, Tyson, JBS, Cargill, Archer Daniels Midland, etc. Farmers certainly aren't seeing any margins!

> Especially when most of us engineers are collecting paychecks from companies with far, far higher margins than that.

Ah yes, it's important to remember we should only care about ourselves.

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