The Death Of Retail


Costco doesn’t publish its margin caps but, by looking through the company’s 2014 financial statements, we can see that for the past five years, their margins have held steady at about 10.6%. This means that for every $100 that Costco spends to buy its products, it’s selling them, on average, for $110.60.

The word average is important in that explanation. Costco has its own brand, Kirkland Signature, that does surprisingly well for a store brand. This label, obviously, earns a higher profit as there are less middlemen involved and Costco can charge a higher mark-up to account for its lower cost of obtaining the products. The 10.6% average mark-up therefore, includes the higher margins on Kirkland Signature brands meaning that a name brand product will sell for an even smaller margin than the 10.6% average. This is how Costco maintains its low prices: it makes virtually no money by selling name brand products.


That’s been their business model. There is markup on the products, but it’s only enough to cover the cost of running the stores and HQ staff. The profits are from memberships.


From speaking to a friend whose family makes an edible product that is sold in Costcos, he once told me that while it is great and all (the medium, the wide, accepting audience, etc) Costco is extremely tough. Cuts you down to the bone margin-wise and remember, you have to take back every return. Yes, remember you all who used to return TVs just because of the crazy long warranty (yes, gone now, go figure…)???


Saw someone returning a used Toilet before. I just shook my head.


Dang, do you recall if he was wearing a UCLA sweatshirt??? :slight_smile:


I’ve heard the same about home depot. I’m sure it’s true of most major retailers. I think the internet is changing the balance of power in that game though. It used to be retailers could own you, since they controlled what got on the shelf in the stores. Now anyone can get their product on Amazon, eBay, their own websites, etc. Plus, internet ads are a fraction of the cost of traditional TV and radio ads. You can target them much more to people who’d want your product too.


The distribution-storage-warehouse centers are the thing that Amazon can’t be beaten by anybody. They have a monopoly on the distribution and they are not shy to use USPS to help them in the process.

That’s why so many sellers just send their products to Amazon warehouses and they are not mad at sharing some of the costs of sorting, packaging and shipping them out. Even Ebay sellers do that, of course, they don’t tell anybody their products are at an Amazon warehouse.


Happy New Year @buyinghouse!!! So, was The Prez correct to call for the USPS to raise pricing to Amazon???


Home Depot used to have an indefinite return policy, but not necessarily on products that went bad–more like projects you never got around to and are giving up on. In fact, I am just now looking at receipts from 2009 for things I should return. But they’ve tightened up and I’m betting they’ll no longer let me return these–even with receipt.


Amazon doesn’t deliver all that much via USPS here unless it’s flat packages.

And really who does that hurt? USPS? Because UPS, Fedex, and Off-trac will still deliver the majority of the packages that Amazon doesn’t start delivering themselves.


Hugs to you and your wife my friend! I wish you a very, doable, Happy New Year!

Regarding the prez, I would say to him “mind your god damn business!” Is that kid ever to shut up? Gee! The fires everywhere in this country are more important to talk about.

He hates Bezos, and the Wapo, that’s why.

And, I would include another warning, stop wasting our hard earned $s on golfing! Jesus Christ! The American people didn’t vote for a liar! I won’t be golfing my rear end!

On the topic, any business relies on volume. Those who rely on high prices rather than volume kind of don’t get that much of lift off if their sales are spotty. You know that, we see that on Ebay. In order to make a buck, some sellers rather sell 100 items a day with a $1 profit than selling one every month with $2K profit.

That’s why, the Chinese sellers make a killing even though they lie. Return the item they say, but when you try to do that, you pay a high price, more than what the item is worth because you pay the normal rate, whereas they pay bulk price.

USPS is as is, because republicans have attacked it for many years. They want it to fail, so they can sell it, privatize it, same thing they want with bridge tolls, and the airports. That’s the point, privatizing everything, and we know how good we came of a winner with privatizing or for profit healthcare.

Wait for net neutrality effect pretty soon. 3 people, without any oversight, without being elected, had more power than 80% of the American people saying “don’t do it!”.


This could actually be a good development. Retail space in cities could be converted to residential. Then we can have products delivered from exurbs where it’s cheaper to store the products. Also, the warehouse employees can afford to live there where retail employees can’t afford to live in the cities.


Manteca is an example. I believe, without Googling it, that Amazon has a warehouse there. RE prices went up. Which, for the normal employee can be bad if they move there later than when they open such warehouse. The speculators will eat their lunch.


Ok, here we go…


Buy! Buy!:smiley:


Does anyone shop at Macy’s anymore. How many times have they gone bankrupt?



This thread makes me think investing in commercial space with retailers as tenants isn’t a very good idea.


That was my thought a long time ago when that triple net crap was being pushed around. I just don’t know the viability of commercial properties frankly. Maybe they can be converted to something useful and profitable but I ain’t sticking around to find out… hence regular 1031 exchange i think is better.


Add Kmart to the mix… this could be a problem