To say that actually supermarkets might not make the huge profit out if this that one might think

[ouch321]

Originally I thought that the supermarkets, Andrex, Carex and the like would be looking forward to really good profits with all huge increase in the amount of sales.

But say Asda, which I hear are hiring loads of staff right now to fill shelves to meet the volume of customers, this will push their wage bill up. But at the end of the year, if Bob would normally buy one jar of pasta sauce each month and instead buys twelve at one go the volume of sales at the end of the year is the same it's just that the purchases that normally would have been spread out have been bunched up in one go so their profits won't be higher but their costs would have gone up.

I know that most of the hot panic buys are loo roll, pasta, handwash which don't go off though it's now moved onto milk/fresh produce and yes to some extent the fresh produce will need replacing but on the other hand even milk/fish will last a while in the fridge or people are chucking packs of mince and such like in the freezer.

So am I right or wrong? Who is good at financial modelling

There are big additional costs for supermarkets at the moment - bringing in extra staff, buying from non-standard suppliers, hiring extra lorries, even sourcing additional distribution hub space. So yes, there's a lot of extra cash going in the tills, but it's not necessarily all going to translate into profit.
Margins in food retail are tight at the best of times, and cost-to-serve calculations (ie do we make enough from this to make it worthwhile) has pretty much gone out of the window in the last couple of weeks as the priority has been getting stock to stores by whatever means possible.

They’ve all said they will pay full pay to employees who are self isolating - that will be hundreds of millions in wages alone.

There will be losses on their clothes and other seasonal items.
Funnily enough i noticed more clothes buying last 2 weeks than since xmas! Lots of all sizes. No idea why. Maybe people buyjng it in case if lockdown/shortages in coming months?

They are selling more, but it isn't clear profit is it? They are having to buy in shitloads more as well. And pay more for the huge increase in the number of home deliveries, van fuel, wages, warehouse staff costs, you name it. Plus they are all recruiting temporary staff in store.

And at some point, when things are eventually back to normal, people won't need to buy stuff because they will all be using up what they have left over. So supermarket takings will take a dive.

I wonder how much food wastage there will be?

Yes and no.

The total sales value won't be the £1 Bn plus extra sales they've had.

But they will see some uplift over the year.

1. They've stopped volume deals so all is selling at full price

1. People are buying whatever they can so trading up to higher priced products

1. Just the footfall will mean more extras bought that might not have been otherwise. Eg I sent DP for bread and cat food but he came back with 2 bags of shopping with lots of sweets and Jaffa cakes (lockdown staples )

1. Having stuff available does increase usage. That's why they do volume deals eg3for 2. Long ago when I worked for a big retailer I did some analysis to check the long term impact and they do drive consumption. Amazingly even a condom 3for 2 ends up with people buying more condoms in a 12 month overall. Not 1/3rd more (eg the free pack) but about 10% more I seem to remember. Do they shag more? Who knows.

The bigger thing is though that after all this is over there will still be a recession & that will negate the benefit they are seeing now I suspect.

I noticed Tesco have removed their offers on a couple of long life things that I buy regularly e.g. Babybels. I still buy the same amount but am paying more.

@notalwaysalondoner when I have done pricing analysis in the past there is a post promotion dip but overall they drive some increase in volume usage, especially on more discretionary things.
Maybe the bogof calculations don't match up but 3for 2 made financial sense.

I have totally changed my habits and won't go back.

Local corner shop saved me. Literally hadn't even seen it before. I will buy from that man for as long as he is in business. And I hope all local businesses receive the same boost.

And yes, your panic buying will cause people to be employed then laid off. And before you decide this doesn't apply to you - if you have loo rolls in cellophane, or paracetamol you have bought with no pain, or pasta when you have a cupboard full of food - then this is YOU

They do indeed have higher overheads but the cost of food at the till takes this into account. Also, they can justifiably reduce ranges, which makes operations cheaper (normally supermarkets have to stock extensive choice in their ranges because lack of some sometimes very specific products will send shoppers elsewhere for their entire shop). Food consumption will go up because people are not eating outside the home, and people generally consume more food when cooped up indoors. There will also be wastage caused by people stocking up on food they don't like that much but can't get alternatives. They will then not eat this once their usual choice becomes available. So overall, supermarket profits will rise.

I know one supermarket has stopped new promotional activity on most core lines because they don’t need the uplift that the discount would drive... so yeah they’re just banking the extra profit.

Some good points I had not considered.

I do also wonder if there will be a greater shift between in-store and online. For example, my parents normally go into the store but their age dictates that they don't do so now, so they have just had their first online delivery. They, and others like them, may switch long-term to online delivery.

Till now it is my understanding that the supermarket industry has not moved to much to being dominated by online sales as many still like to go in personally and try and get the freshest box of strawberries or bottle of milk with the longest use by date and such like.

It's quite interesting, shopping psychology.

(Yes, I live a sad life)

I think we need the shops and supermarkets. There are always winners and losers any dire situation. The supermarkets should now be employing those who have no work (not my DN and DN who have no school to go to but fancy a job!) . That job could be a life saver for some. We need supermarkets and we need them to sort out food and supplies for all. If they make a profit so be it. It will help us all if as many companies as possible continue to make profits. It ensures employment and staves off recession which will surely follow.

A lot will be wasted or donated to charity so I guess they will still be on an up by the end of the year unless people all lose their jobs and don’t get paid by the government and therefore have to live on pasta and baked beans the rest of the year