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Google Launches Fresh-Grocery Deliveries

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Re: Google Launches Fresh-Grocery Deliveries

#131

Post by nickpsecurity »

dzhiurgis wrote: post #83
nickpsecurity wrote: post #27

Google usually operates in high-margin industries. This is the opposite. I've had the "privilege" of working in this one. You're talking all kinds of players working against each other for perceived self-gain with individual companies constantly pushing costs down to the point their staff can barely break even. And Google intends to compete with that using something with higher cost? Pretty crazy. I was unsurprised t…

It works for Amazon though. They are obviously paving the way for self-driving cars and they start with self driving deliveries. Yes, impulse buying is big, but that is one of the reasons I do not like going shopping. It is a huge time waste to go thru all isles.

That's like saying desktops work for Microsoft so BeOS or Linux have a major chance. ;) Ecosystem, partner deals, existing base for logistics, strong brand with consumers, massive revenue... all things Amazon has to make its grocery play more successful. Not to mention they're the leader in online retail.

Google's effort looks more like how a startup would do it. No direct comparison here.

Re: Google Launches Fresh-Grocery Deliveries

#132

Post by Retric »

michaelt wrote: post #59
nickpsecurity wrote: post #27

Google usually operates in high-margin industries. This is the opposite. I've had the "privilege" of working in this one. You're talking all kinds of players working against each other for perceived self-gain with individual companies constantly pushing costs down to the point their staff can barely break even. And Google intends to compete with that using something with higher cost? Pretty crazy. I was unsurprised t…

And Google intends to compete with that using something with higher cost? The UK already has at least one mass-market grocery delivery company that is profitable (albeit barely - a pre-tax profit of £11.9m on sales of £1,202.9m). The CEO, Tim Steiner, believes in the long term they can be more efficient than bricks-and-mortar retailers by having a few large, automated warehouses fulfilling orders for the entire count…

1% margin is actually fairly healthy in that industry.

Re: Google Launches Fresh-Grocery Deliveries

#133

Post by nickpsecurity »

amelius wrote: post #117
nickpsecurity wrote: post #27

Google usually operates in high-margin industries. This is the opposite. I've had the "privilege" of working in this one. You're talking all kinds of players working against each other for perceived self-gain with individual companies constantly pushing costs down to the point their staff can barely break even. And Google intends to compete with that using something with higher cost? Pretty crazy. I was unsurprised t…

> Google usually operates in high-margin industries. This is the opposite. Perhaps groceries are a great way to obtain valuable customer data?

Maybe. Prevalence of collection and brokering means data on individual customers is pretty cheap AFAIK. Grocery infrastructure and deals aren't. If this is their goal, they'd be better off partnering with a major chain doing analysis for them in return for a copy of the data.

Re: Google Launches Fresh-Grocery Deliveries

#134

Post by nickpsecurity »

Retric wrote: post #132
michaelt wrote: post #59

Earlier quoted context omitted.

And Google intends to compete with that using something with higher cost? The UK already has at least one mass-market grocery delivery company that is profitable (albeit barely - a pre-tax profit of £11.9m on sales of £1,202.9m). The CEO, Tim Steiner, believes in the long term they can be more efficient than bricks-and-mortar retailers by having a few large, automated warehouses fulfilling orders for the entire count…

1% margin is actually fairly healthy in that industry.

The good ones are all 2-5%. Anything below that is underperforming, a no-frills shop (eg dollar store), or trying to crush competition with a growth strategy. In any case, talking to people that work at most of them show they barely function if they're near 2%.

We must also note that this is the final profit. That's after executives, shareholders, employees, real estate, etc have been paid. The markup over the price of goods is still often around 30-50% to cover above costs. So, there's plenty of potential for competitiveness by eliminating some of that.

Branding, variety, psychological manipulation, and cost due to volume deals give advantages hard to beat. The big players also tend to acquire any company that is in the process of doing that, too.

Re: Google Launches Fresh-Grocery Deliveries

#135

Post by nibs »

nickpsecurity wrote: post #27

Google usually operates in high-margin industries. This is the opposite. I've had the "privilege" of working in this one. You're talking all kinds of players working against each other for perceived self-gain with individual companies constantly pushing costs down to the point their staff can barely break even. And Google intends to compete with that using something with higher cost? Pretty crazy. I was unsurprised t…

In Canada, our grocery stores are so competitive on price that most of the actual bottom line profit derives from fining suppliers for all kinds of things (products not selling through, mislabelling, late shipments, short orders, back orders, lack of responsiveness, food safety infractions). Even the impulse items are only marginally if at all profitable. I only know this because we make financial software for the industry. It is a strange byproduct of competition.

Re: Google Launches Fresh-Grocery Deliveries

#136

Post by Animats »

Services which do this by sending people to retail stores suffer from out-of-stock problems. They don't have inventory information. So you tend to get orders with missing items. Amazon, which has its own automated warehouses, knows what it has in stock when it accepts the order, and can tell you at ordering time what's out of stock.

Google is doing an Uber-like job here - they just run the shopping cart program. Others do all the work.

Re: Google Launches Fresh-Grocery Deliveries

#137

Post by petra »

mbesto wrote: post #114
Dwolb wrote: post #102

Earlier quoted context omitted.

It's not that low... Amazon appears to do about 7B in EBITDA on about 100B revenue. I'd bet AWS is propping that up a bit with its really high margins. If you compare them to another grocer (which they kind of are), their numbers seem more reasonable - the industry profit margins are typically single digits.

The point is that all retail is super low margin (in this case < 10%) which is made up for in volume. For Google the only incentive is to go towards a volume play because the margins will _never_ be great. The OP's point stands - this seems odd that Google would go after such a low-margin area, considering almost everything else they do has super high margins (30%+). The challenge in the US is that volume is hard to…

Let say they own this market. Than it would become possible for them to shift to an UBER like model, and with that ,margins become pretty good.

Re: Google Launches Fresh-Grocery Deliveries

#138

Post by nickpsecurity »

nibs wrote: post #135
nickpsecurity wrote: post #27

Google usually operates in high-margin industries. This is the opposite. I've had the "privilege" of working in this one. You're talking all kinds of players working against each other for perceived self-gain with individual companies constantly pushing costs down to the point their staff can barely break even. And Google intends to compete with that using something with higher cost? Pretty crazy. I was unsurprised t…

In Canada, our grocery stores are so competitive on price that most of the actual bottom line profit derives from fining suppliers for all kinds of things (products not selling through, mislabelling, late shipments, short orders, back orders, lack of responsiveness, food safety infractions). Even the impulse items are only marginally if at all profitable. I only know this because we make financial software for the in…

That's really wild. Here in the U.S., the industry does a bit of that in terms of short orders. The rest I don't recall being big issues. Companies do whatever is good for business then use lawyers for the rest. ;)

Re: Google Launches Fresh-Grocery Deliveries

#139

Post by Retric »

nickpsecurity wrote: post #134
Retric wrote: post #132

Earlier quoted context omitted.

1% margin is actually fairly healthy in that industry.

The good ones are all 2-5%. Anything below that is underperforming, a no-frills shop (eg dollar store), or trying to crush competition with a growth strategy. In any case, talking to people that work at most of them show they barely function if they're near 2%. We must also note that this is the final profit. That's after executives, shareholders, employees, real estate, etc have been paid. The markup over the price…

"According to a paper published by the CDFI Fund, the average profit margin for the supermarket industry was 1.9 percent in 2010. The profit margin varies by sub-classification. According to analysis of Yahoo! Finance data, the average net profit margin for publicly traded US-based grocery stores for 2012 is close to 2010's 1.9 percent average. Sagework's research shows that privately owned grocers had average profit margins of 2 percent in 2010 and only 1 percent in 2011." http://yourbusiness.azcentral.com/profit-margin-supermarket-...

Upmarket you can get ~3.5 to 6 percent which helps boost the average to 1.9, but for bulk goods 1% is not actually bad.

PS: Natural and organic food markets have some of the highest profit margins. For example, in 2012 Whole Food's net profit margin was 3.79 percent and Fresh Market's was 5.58 percent. Traditional grocery stores have net profit margins ranging from 1.96 percent for Harris Teeter and 1.91 percent for Kroger's to 1.77 percent for Safeway.

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