What exactly happened with Kroger?

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arizonaguy
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Re: What exactly happened with Kroger?

Post by arizonaguy »

BatteryMill wrote: July 21st, 2021, 4:24 pm
arizonaguy wrote: July 21st, 2021, 2:07 pm
Walmart has also been closing stores left and right without replacement nationwide.

It's simply the byproduct of both companies shift to digital. I'd imagine over the next 10 - 15 years we'll easily see Kroger close 500 stores and Walmart close 1500 stores if digital takes off like projected and/or Amazon begins to really chew up market share.
No way. I really would not want it to get to this, where the streets are filled with vacant big-box buildings and the grocery trip becomes a flat experience on one's smartphone. Of course other things are going on where these stores are weak, but hopefully this is not going to be entirely true.
Believe me, I don't want it to get to this either, but look at what's happening to malls. Grocery is the next frontier.
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Re: What exactly happened with Kroger?

Post by BatteryMill »

arizonaguy wrote: July 21st, 2021, 5:37 pm Believe me, I don't want it to get to this either, but look at what's happening to malls. Grocery is the next frontier.
I wouldn't think that grocery would die out before other forms of retail. That is why Walmart and Target started to bank more on grocery in the late 2000s when the Amazon ball got rolling. Either way, I hope there is a way this can be curtailed so the physical experience won't die out or be drastically neutered - especially with a storied chain like Kroger.
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Re: What exactly happened with Kroger?

Post by arizonaguy »

BatteryMill wrote: July 21st, 2021, 6:02 pm
arizonaguy wrote: July 21st, 2021, 5:37 pm Believe me, I don't want it to get to this either, but look at what's happening to malls. Grocery is the next frontier.
I wouldn't think that grocery would die out before other forms of retail. That is why Walmart and Target started to bank more on grocery in the late 2000s when the Amazon ball got rolling. Either way, I hope there is a way this can be curtailed so the physical experience won't die out or be drastically neutered - especially with a storied chain like Kroger.
Wall Street is committed to emphasizing online over physical retail because the year over year percentage growth gains are greater online versus physical retail. Wall Street only cares about growth.

It's why the grocers who are growing their physical footprint at this time: Aldi, Lidl, Wegmans, Hy Vee, HEB, WinCo, Stater Brothers, Publix, and I'll even throw in Meijer are either employee owned or privately held.

I don't think physical grocers will go away but I do think that the physical grocery scene of the future will be dominated by privately held or employee owned companies as the publicly held ones slowly cannibalize themselves to please Wall Street.
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Re: What exactly happened with Kroger?

Post by storewanderer »

I think grocery stores will continue to survive and thrive. I do see grocery being one of the last pieces standing if the rest of the physical retail stores actually disappear (which I somewhat doubt). If the restaurant industry can't figure out how to staff itself the grocers will see some spill over too as customers will be forced to cook as restaurants are less available and/or more expensive.

We may see Wal Mart and Target close hundreds of more stores in the coming years for a variety of reasons but I even somewhat doubt that. Both chains need to reconfigure their stores for a variety of reasons. Wal Mart needs to deal with theft and its inability to stock its shelves and pull online grocery orders efficiently. Target needs to address its online strategy as the current model with dozens of employees running around the stores picking ship out orders and sending 4-5 boxes for a $35 order from 12 states away does not seem efficient (though Wall Street thinks it is the best strategy ever- okay- any retailer could do that).

As far as Kroger and Ocado goes hopefully the robots in the US won't fight with each other and cause any fires like they have overseas.

As far as the ability of the regional chains to steamroll over the publicly traded chains I generally agree. However regional chains can also make some very bad decisions. I am seeing one very strong employee owned/regional chain only paying $10/hr to start in a market where Wal Mart is paying $16/hr and most McDonalds are paying $12/hr, and it is having some real challenges with staffing- the store has a dirty feel throughout though is still well stocked but has turned into an even more unpleasant place to shop. I am seeing another strong regional chain converting stores to a format that customers hate and being completely tone deaf to customer feedback. And I am seeing both Safeway and Kroger taking advantage of these bad decisions by these two regionals- either through running more/hotter ads, advertising higher starting pay rates, etc.
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Re: What exactly happened with Kroger?

Post by HCal »

arizonaguy wrote: July 21st, 2021, 2:07 pm
Walmart has also been closing stores left and right without replacement nationwide.

It's simply the byproduct of both companies shift to digital. I'd imagine over the next 10 - 15 years we'll easily see Kroger close 500 stores and Walmart close 1500 stores if digital takes off like projected and/or Amazon begins to really chew up market share.
Walmart's store count is still growing. They are opening more stores than they are closing each year.

Kroger and Safeway/Albertsons are shrinking because they are facing pressure from discounters (Aldi, Grocery Outlet, Winco) on
one end, and health food stores (Trader Joe's, Sprouts) on the other. I don't think it has to do with the shift to digital, which they are both handling quite well. They simply can't compete against newcomers to the market, most of which are non-union and have smaller footprints.

I don't expect the shift to digital to result in significant store closures. Most digital grocery orders are fulfilled from a store, not a centralized warehouse. If anything, we may start to see more personal shoppers in the physical stores. But online grocery sales have actually been dropping the last couple of months due to the recession of the pandemic, and unless there is another wave of lockdowns, that trend will probably continue.
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Re: What exactly happened with Kroger?

Post by pseudo3d »

arizonaguy wrote: July 21st, 2021, 5:37 pm
BatteryMill wrote: July 21st, 2021, 4:24 pm
arizonaguy wrote: July 21st, 2021, 2:07 pm
Walmart has also been closing stores left and right without replacement nationwide.

It's simply the byproduct of both companies shift to digital. I'd imagine over the next 10 - 15 years we'll easily see Kroger close 500 stores and Walmart close 1500 stores if digital takes off like projected and/or Amazon begins to really chew up market share.
No way. I really would not want it to get to this, where the streets are filled with vacant big-box buildings and the grocery trip becomes a flat experience on one's smartphone. Of course other things are going on where these stores are weak, but hopefully this is not going to be entirely true.
Believe me, I don't want it to get to this either, but look at what's happening to malls. Grocery is the next frontier.
Most of what happened to malls and the stores that anchored them was their own undoing. I mean, we can safely say that Lampert did more damage to Sears than Amazon could ever hope to achieve.

Meanwhile, for all the hype the full Amazon Fresh grocery stores got and how this synergy was going to remake the grocery market hasn't really happened as they predicted, and the Amazon Fresh supermarket turned out to be a surprisingly normal grocery store.
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Re: What exactly happened with Kroger?

Post by buckguy »

Walmart's business has been stagnant since the early 2000s and grocery helped them mostly in the short-run. They've either saturated markets or face high costs for entry (more expensive real estate, insurance, etc. and less willingness to subsidize them). Their model has been based on volume and low labor costs to generate profit and that is no longer viable. I could see them closing stores mostly in metro areas--high costs, more competition. Grocery is expensive in terms of equipment, stock rotation, etc--I could see them strategically scaling back some of their offerings. Target has a different model that's more based on markups and limiting low margin merchandise. I could see them scaling back food to a limited, mostly high margin, low maintenance selection---food was really forced on them by Wall Street and I'm sure they'd happily reduce its footprint.

Brick and mortar stores will stick around because people like to pick out their own perishables and fill-in shopping often happens at the last minute. From an operator perspective, there probably are more impulse buys in a brick and mortar than online environment. The private operators definitely thrive because they don't have to deal with Wall Street. But it's more than that. historically, chains stumble when they get too big---a lot of large regional or semi-national chains imploded (A&P the original First National, Colonial, Grand Union, National Tea, Food Fair) or drastically shrank (Acme--pre-Skaggs, Winn-Dixie) because they couldn't compete effectively in a lot of their markets, esp. when faced with market saturation or macroeconomic conditions like inflation. Kroger fell into the latter group back in the 70s and 80s and they were lucky in some places like Atlanta where their competition imploded or Nashville where their main competition (HG Hill) stopped investing in their grocery business.
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Re: What exactly happened with Kroger?

Post by pseudo3d »

buckguy wrote: July 22nd, 2021, 10:39 am Walmart's business has been stagnant since the early 2000s and grocery helped them mostly in the short-run. They've either saturated markets or face high costs for entry (more expensive real estate, insurance, etc. and less willingness to subsidize them). Their model has been based on volume and low labor costs to generate profit and that is no longer viable. I could see them closing stores mostly in metro areas--high costs, more competition. Grocery is expensive in terms of equipment, stock rotation, etc--I could see them strategically scaling back some of their offerings. Target has a different model that's more based on markups and limiting low margin merchandise. I could see them scaling back food to a limited, mostly high margin, low maintenance selection---food was really forced on them by Wall Street and I'm sure they'd happily reduce its footprint.

Brick and mortar stores will stick around because people like to pick out their own perishables and fill-in shopping often happens at the last minute. From an operator perspective, there probably are more impulse buys in a brick and mortar than online environment. The private operators definitely thrive because they don't have to deal with Wall Street. But it's more than that. historically, chains stumble when they get too big---a lot of large regional or semi-national chains imploded (A&P the original First National, Colonial, Grand Union, National Tea, Food Fair) or drastically shrank (Acme--pre-Skaggs, Winn-Dixie) because they couldn't compete effectively in a lot of their markets, esp. when faced with market saturation or macroeconomic conditions like inflation. Kroger fell into the latter group back in the 70s and 80s and they were lucky in some places like Atlanta where their competition imploded or Nashville where their main competition (HG Hill) stopped investing in their grocery business.
The chains you mentioned like A&P, Winn-Dixie, et. al. suffered because they put too much emphasis on market share and store growth, and newer, larger, better competition caused a "chain" reaction where they lacked the capital to renovate and expand their store base where it counted. Safeway also similarly suffered, and that put the divisions that got spun off or sold in the 1980s at a disadvantage. Kmart, likewise, set itself up for failure due a wide expansion program that left an outdated store base by the 1990s with little capital, and what ended up happening is a small amount of Super Kmart stores were built, with most stores receiving cheap "Big Kmart" re-dos. (Again, there were other some issues in the company, but this was a major issue).

Walmart built smart with an organized expansion out of the South and had enough to hit fast and hard with Supercenters. The company's far from perfect, allowing out-of-stocks to plague the company while they chase e-commerce ventures, but the physical condition of most of their stores is fine, and there's enough money flowing through the company to keep up capital investment.

Taking it back to Kroger, Kroger has, since the early 1990s, pruned down markets to the most profitable ones (save for a few big-ticket acquisitions) and gave them the attention they need. The only division that seems to be decaying at a faster rate than normal is Ralphs, which has more to do than macro Southern California/Los Angeles/UFCW issues that Ralphs can't control rather than anything Kroger does. They also never got "Marketplace" stores either.
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Re: What exactly happened with Kroger?

Post by storewanderer »

buckguy wrote: July 22nd, 2021, 10:39 am Walmart's business has been stagnant since the early 2000s and grocery helped them mostly in the short-run. They've either saturated markets or face high costs for entry (more expensive real estate, insurance, etc. and less willingness to subsidize them). Their model has been based on volume and low labor costs to generate profit and that is no longer viable. I could see them closing stores mostly in metro areas--high costs, more competition. Grocery is expensive in terms of equipment, stock rotation, etc--I could see them strategically scaling back some of their offerings. Target has a different model that's more based on markups and limiting low margin merchandise. I could see them scaling back food to a limited, mostly high margin, low maintenance selection---food was really forced on them by Wall Street and I'm sure they'd happily reduce its footprint.

Brick and mortar stores will stick around because people like to pick out their own perishables and fill-in shopping often happens at the last minute. From an operator perspective, there probably are more impulse buys in a brick and mortar than online environment. The private operators definitely thrive because they don't have to deal with Wall Street. But it's more than that. historically, chains stumble when they get too big---a lot of large regional or semi-national chains imploded (A&P the original First National, Colonial, Grand Union, National Tea, Food Fair) or drastically shrank (Acme--pre-Skaggs, Winn-Dixie) because they couldn't compete effectively in a lot of their markets, esp. when faced with market saturation or macroeconomic conditions like inflation. Kroger fell into the latter group back in the 70s and 80s and they were lucky in some places like Atlanta where their competition imploded or Nashville where their main competition (HG Hill) stopped investing in their grocery business.
Kroger had a great run under Dave Dillon as CEO. First they made a lot of really good decisions with regard to synergy decisions across their operations, and at the same time Albertsons imploded and Safeway was imploding. They also saw other smaller competitors like Marsh go under.

Kroger has not closed many stores in the past decade and 80% of those closures have been at Ralphs and QFC. Kroger seems to have closed more stores in the Kroger territory over the past couple years than they did in the past 15 years combined.

Fast forward to today and Kroger is making a lot of not so great decisions. This Kroger really reminds me of the old Safeway in the 00's. Not completely broken yet, but bad decision after bad decision will lead to the same result.

The merged Albertsons and Safeway despite having closed hundreds of stores seems to be finding its way to some extent or maybe it just looks better next to the constantly going downhill Kroger.
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Re: What exactly happened with Kroger?

Post by BatteryMill »

pseudo3d wrote: July 22nd, 2021, 3:13 am
arizonaguy wrote: July 21st, 2021, 5:37 pm
BatteryMill wrote: July 21st, 2021, 4:24 pm

No way. I really would not want it to get to this, where the streets are filled with vacant big-box buildings and the grocery trip becomes a flat experience on one's smartphone. Of course other things are going on where these stores are weak, but hopefully this is not going to be entirely true.
Believe me, I don't want it to get to this either, but look at what's happening to malls. Grocery is the next frontier.
Most of what happened to malls and the stores that anchored them was their own undoing. I mean, we can safely say that Lampert did more damage to Sears than Amazon could ever hope to achieve.

Meanwhile, for all the hype the full Amazon Fresh grocery stores got and how this synergy was going to remake the grocery market hasn't really happened as they predicted, and the Amazon Fresh supermarket turned out to be a surprisingly normal grocery store.
That's definitely what most should have figures about Sears if they read up on the history. Also, how is Amazon Fresh doing? Will they succeed or flounder?
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