Supermarkets

Supermarkets buy food, household goods, and groceries in huge quantities, then sell them to consumers at a small markup. The profit per item is tiny — pennies on a can of soup — but they sell billions of items.

Most people shop at one of just a handful of chains. The biggest in the US: Walmart, Kroger, Costco, Albertsons, Whole Foods (Amazon).

Buy products from food manufacturers (Coke, Nestlé, Kraft) and farmers. Move them through massive distribution centers. Stock the shelves. Sell at a small markup.

Modern grocers also operate private-label brands ("store brands" like Kirkland at Costco, Great Value at Walmart) where they make a much higher margin since they cut out the middleman brand.

Selling food and household goods at a thin markup. Private-label brands at higher margins. Pharmacy. Fuel (many large grocers operate gas stations). Online delivery and pickup fees.

Costco is unusual — most of its actual profit comes from membership fees, not from selling products. That's the secret to its consistency.

The bigger you are, the better deals you can negotiate from suppliers. Walmart and Costco can pressure brands to give them special pricing that small grocers can't get.

Scale also helps with distribution costs, technology investments, and private-label development. This is why the industry keeps consolidating.

Traditional grocers (Kroger, Albertsons) compete on convenience, location, and product variety. Lower margins per item, higher volume per store.

Warehouse clubs (Costco, Sam's Club) sell in bulk at deep discounts and charge membership fees. Higher per-customer revenue, longer shopping trips, very loyal customers.

Food and labor inflation can outpace what stores can charge. Online competition (Amazon, Instacart). Labor unions and wage pressure. Shoplifting (a real and growing issue).

And weight-loss drugs may eventually reduce snack and processed-food demand — though so far the effect on grocery revenue is small.