Kroger Loses $12 Billion: What Low-Income Shoppers Fleeing to Amazon and Walmart Reveal About the Real Economy
Kroger lost $12 billion in sales this year as 700,000 lower-income shoppers made 30 million fewer trips to the store. Nicky P and Luke Tatum of Perfect Spiral Capital unpack what that reveals about the real cost of living, why Aldi and Target are winning value shoppers, and the Nelson Nash principle that applies to every dollar you spend.
“Even though they are adding a million higher-income shoppers over this time, they are losing 700,000 lower income shoppers and 30 million trips to the grocery store in that year, down. That is a crazy amount less in grocery trips.”
If you've never listened to Between The Lies before, this episode is a fair place to start, because it doesn't begin with a lecture on interest rates, it begins with a receipt. Host Nicky P and Luke Tatum of Perfect Spiral Capital sit down with a stat most people scrolled past: Kroger lost $12 billion in sales over the past year to competitors like Amazon and Walmart. What follows isn't really a story about one grocery chain. It's a story about what happens when the cost of living rises faster than anyone in charge is willing to admit, and what you can actually do about it.
What We Covered
A $12 billion stat with a very specific cause. Kroger didn't lose ground across the board, the chain actually added a million higher-income shoppers over the past year. What it lost was 700,000 lower-income shoppers and 30 million grocery store trips. That split matters. It means the story isn't about Kroger falling out of favor broadly; it's about a specific group of Americans being priced out of trips they used to make without a second thought.
The hidden cost of just getting to the store. Rising grocery prices get most of the attention, but Luke and Nicky P point to a cost that rarely makes the headlines: gas. A round trip to the grocery store easily runs several dollars once you account for real mileage, and that's before anything goes in the cart. Layer that on top of a Federal Reserve funds rate that just moved up to 4% at the top end, raising the cost of financing for everything from corporate debt to the trucks that physically move groceries from farm to shelf, and the price on the shelf tells only part of the story.
“No matter how you dress it up, no matter what story you want to spin, no matter whether you’re a left-leaning news site or a right-leaning news site, the fact is the cost of living is high, and it’s getting higher.”
Why Aldi and Target are having very different moments. Aldi has spent decades building a reputation on razor-thin margins and aggressively low prices, and that discipline is paying off as more shoppers go looking for value. Target, on the other hand, had to cut prices on more than 10,000 items just to post a modest 3.5% improvement quarter over quarter, a sign that even a retailer built on a more premium shopping experience isn't immune to a customer base that's rethinking every purchase.
Brand loyalty is one of the stickiest things in retail, until it isn't. Drawing on nearly eight years in the retail industry, Luke makes a case that consumers almost never switch grocery stores over price alone. The usual triggers are life events: a move, a new child, a new job. When millions of people shift their shopping habits anyway, that's not a marketing story. That's a signal that the cost of living has crossed a line the mainstream inflation numbers aren't fully capturing.
“Generally speaking, consumers do not shift their brand preferences very often... For millions of people to be shifting their behavior en masse, that’s not a good sign.”
Key Takeaway
The most actionable idea in this episode isn't about grocery shopping at all, it's the principle Luke pulls from the opening pages of Nelson Nash's Becoming Your Own Banker: if you owned the store, would you pay yourself retail, or would you pay yourself cost? Applying that same discipline to your own capital, treating it with the same respect you'd expect a business to treat its inventory, is the mindset shift that matters far beyond the checkout line.
Related Episodes
Episode 040: The Five Roles of Banking and the Becoming Your Own Banker Grocery Store Metaphor
Episode 045: Markets, the Fed, and the Real Numbers Behind Rate Hike Expectations
Episode 025: Kevin Walsh, the Fed Chair Pick, and Why the Fed Was Never Independent
“Do you pay retail or do you pay cost? You should pay retail. You should be honest with your own business. Not paying the retail price is stealing from yourself.”
Want the full conversation, including the gas math nobody runs and the Nelson Nash insight that ties it all together? Listen to the full episode and explore more at PerfectSpiralCapital.com/podcast.
FAQ
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Kroger's losses were concentrated almost entirely among lower-income shoppers, 700,000 fewer customers and 30 million fewer trips, while the chain actually added higher-income shoppers over the same period. That split shows the loss wasn't a branding problem; it was a cost-of-living problem hitting one part of the customer base much harder than the rest.
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Indirectly, yes. A higher federal funds rate raises the cost of financing for corporate debt, trucking, warehousing, and every other link in the supply chain that gets food from a farm to a store shelf. That added financing cost gets built into the price on the shelf even though the rate itself never touches the product directly.
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Under normal circumstances, people rarely switch store, the typical triggers are life events like a move, a new baby, or a new job. When millions of households shift buying habits at once with no shared life event behind it, that's a sign the cost of living itself has become the trigger.
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Buying larger quantities, a half or quarter of an animal instead of individual cuts, for example, can meaningfully lower the per-unit cost and cut down on the number of trips (and the gas) needed to keep a household stocked. The tradeoff is upfront cost and freezer space, but for many households the math works out in their favor over time.
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Nash opens the book by asking whether, if you owned a grocery store, you'd pay yourself retail price or wholesale cost when you bought something off your own shelf. The answer is retail, because not doing so is effectively stealing from your own business. Applied to personal finance, it means treating your own capital with the same discipline and respect you'd expect a well-run business to show its inventory.
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Infinite banking doesn't lower grocery prices, but it gives you a source of capital and consistent, compounding growth that doesn't depend on the Fed's next decision. Instead of being purely reactive to rate hikes and inflation, you're building a system that grows on its own terms regardless of what the FOMC does next.
““Every step of the process of getting that food to the grocery store so you can spend that $4 is now built into the new cost of that.”
