With online shopping becoming a more widespread part of Americans’ lives, the question of the future of the United States Post Office has focused on whether it will be bought out by Amazon, or killed off altogether by robots. Similarly, many on the publishing side of the business have been questioning whether the loss of traditional media sales to the internet has damaged the industry. But the biggest losers are not newspapers, magazines, or book publishers, but the discount warehouse chains like Walmart and Costco. As staff writer Sam Youngman writes for The New York Times, now they have moved into the delivery business, they are killing what was left of their legacy businesses — but they can’t afford to close their doors.
Discount supermarkets may be the only survivors among giant stores that once punched hard through the American psyche, but they are now strangling bricks-and-mortar jobs at the expense of discount shopping.
Retail experts believe the financial pressures of the discount industry have contributed to a recent uptick in job loss from the traditional retail sector and say that the pressure comes not only from traditional rivals like Walmart but also from chains like Costco and Trader Joe’s. Those “middle-class” grocers have gotten into the delivery business, eventually exiting the retail business to generate the same amount of revenue at scale.
A company called Noodles & Co., which began by doing takeout restaurant takeout, has been rapidly expanding its online order-ahead business in recent years. Its founder, Kevin Reddy, called the program a “profit center,” that provided the “ability to save space, trim expenses, and reinvest those back into the consumer.” Walmart and Costco are also both rapidly pursuing online delivery.
While Walmart remains the king of its industry, Costco has been gradually pulling away from rivals and becoming more profitable. Without a cost advantage over its competitors, a lower-cost path to Costco’s sweet spot of half off most merchandise may eventually render it a non-player in the industry.