NYC to open municipal grocery store in 2027

https://www.grocerydive.com/news/new-york-city-owned-grocery-store-manhattan-mamdani/817381/

by DarkContinent • 3 months ago

59 165 3 months ago

Not a new idea and the intention seems to be good. I wonder how will the implementation go. Where does the stores source merchandises? What is the volume of the five stores in total? How do they plan to offer a better price -- is it a percentage lower than some other stores, or something else? What if they have to run them with a loss? Such and such.

halflife16• 3 months ago

This sounds extremely non economically viable.

The municipality which has monopoly on land taxes and costs will compete with stores that must pay taxes and rent? Won’t it just cause neighboring stores to close?

Won’t a better option be subsidizing taxes for grocery stores, and let the discounts competitively pass unto the customers?

asdff15• 3 months ago

Major grocers are more inclined to form cartels on price than to engage in organic competitive action. These businesses are too large and incentives too perverse for free market dynamics to apply anymore.

gruez7• 3 months ago

Major grocers are more inclined to form cartels on price than to engage in organic competitive action.

Even if we take at face value that this is happening, their margins are famously low (ie. low single digits[1][2]) that any improvements are likely negligible. In the best case scenario where they're run as competently/efficiently as a normal grocery store, but don't take any profits, you'd be saving like 50 cents on a $10 pack of ground beef. Of course, all of this would go out the window if it's less efficient, either due to government incompetence[3], or lack of scale.

[1] https://www.macrotrends.net/stocks/charts/ACI/albertsons/pro...

[2] https://www.macrotrends.net/stocks/charts/KR/kroger/profit-m...

[3] https://en.wikipedia.org/wiki/Noe_Valley_public_toilet

KK7NIL3• 3 months ago

Those are pretty extraordinary claims with very little evidence.

And, even if they are true, the obvious solution would be to enforce the already existing antitrust and competition laws, not to have the government directly engage in commerce.

woah• 3 months ago

Oh, that must be why the grocery business is wildly profitable

ilaksh• 3 months ago

I wonder if there is a way to improve pricing more systemically by combating some of this.

Or if there could be some kind of network and information protocol that could provide a decentralized alternative.

Maybe there could be an Internet protocol or NYC Internet protocol that food suppliers could list low price items with. Independent stores could order from here, shipped to their store, or maybe one or two city warehouses where they could pick up.

Maybe another system where suppliers could voluntarily detail cost disruptions, allowing government or other organizations insight and sometimes the possibility of helping alleviate those issues etc.

I mean the government already spends a lot to subsidize retail food purchases. Maybe another idea is just a very easily accessible new app for credits that is NYC only?

It's just that making a single store puts all of the logistical and other issues onto one government department and location, which has been shown in socialist countries to break down.

I am all for a few more socialist policies (I am lucky to have survived this long on outsourcing rates without a consistent healthcare plan), but it definitely needs to be a contemporary effort and not some centralized 1950s model.

halflife16• 3 months ago

That may be, but you can direct subsidies towards inverse relation to the store’s income. You can even add extra taxes for large chains.

But as others said, groceries are working on minimal margin. And all of them work with the same wholeselles (except those with vertical integrations), and this is a nation wide problem.

wahnfrieden4• 3 months ago

In some neighborhoods there are only luxury grocery options.

Groceries also form cartels as the other commenter mentioned. The biggest grocers in Canada did it for many years until they were penalized for it (though it’s likely still continuing in other ways - the same players are now under investigation for selling underweight meats)

The estimated cost to consumers from bread price-fixing was $4-5 billion

halflife16• 3 months ago

It’s about supply and demand. Luxury grocers provide a shopping “experience”, where low cost grocers do not. In a luxury neighborhood it would make sense the shoppers are looking for experience more so than low cost.

yohannparis2• 3 months ago

Why does everything needs to be economically viable?

koolba• 3 months ago

Because that’s what has traditionally allowed western countries to have a wide availability and inventory of goods vs communist economies.

halflife16• 3 months ago

Not everything does - transport infrastructure, healthcare, sewage, for example do not.

But economic viability -> competition -> research and development -> economic growth

tacostakohashi2• 3 months ago

I think that's essentially the entire point, considering that most of the economically viable grocery stores already exist.

tencentshill• 3 months ago

He won by not being a capitalist. He campaigned on doing something to actually meet the basic needs of the people who elected him. This is the cost of that promise. This will force them to compete on those terms instead of directly on money.

shimman• 3 months ago

You sound extremely privileged and frankly out of touch (not uncommon with the HN demographic).

Do you think working families in NYC don't deserve the same monetary relief that massive corporations get with their own welfare programs? Why should trillion multinational companies take our public money to subsidize their businesses and we can't do the same for workers?

Why do you prefer helping non human entities (corporations) over literal humans?

halflife16• 3 months ago

Subsidies can go to small businesses owners. Not just large corporations.

darth_avocado3• 3 months ago

Won’t it just cause neighboring stores to close?

Hopefully they kept all those profits around from the time they price gouging consumers in the name of “supply chain issues”, “transitory inflation”, “bird flu” etc. I still remember all the headlines about bird flu and how egg prices were doubling because of it. Turns out the egg production barely dropped and it was all a ruse to make more money.

SpicyLemonZest2• 3 months ago

You can't conclude it was a ruse without knowing the elasticity of egg demand!

This is ultimately the kind of thing that worries me about a municipal grocery store. Will voters allow it to respond in rational ways to market conditions, or will they expect the city to go out and extort some egg suppliers when market prices rise above what they consider reasonable?

lexicality• 3 months ago

Won’t a better option be subsidizing taxes for grocery stores, and let the discounts competitively pass unto the customers?

I'm sure this time trickle-down economics will work and not simply line the pockets of business owners

philipallstar3• 3 months ago

It's not trickling down. Lower costs do result in lower prices.

halflife16• 3 months ago

When you have a highly competitive market with plenty of actors lower cost does trickle down. Otherwise you’re talking about an extremely complicated cartel which cannot exist.

ceejayoz22• 3 months ago

This sounds extremely non economically viable.

Many things government does are not economically viable. That's why they get left to government.

Won’t it just cause neighboring stores to close?

The idea is to build these where that has already occurred.

woodruffw4• 3 months ago

It’s the idea, although they’ve chosen a weird location for that: La Marqueta is about 300 feet from a grocery store (City Fresh on East 116th). So this pilot store will effectively compete with private groceries for business, muddying the strength of any results (in any direction).

(I say this as someone who is broadly in favor of NYC trying to run city-owned groceries in areas that are underserved.)

halflife16• 3 months ago

Of course, there is a term called coercive monopoly. It exists especially in large infrastructure projects where the startup cost is tremendous so only government, or a single entity without the possibility of competition can enter.

Groceries are not one of these. If you have a problem of high grocery costs, there are many better ways to tackle that other opening a government owned store. But it does make for a great photo op.

WalterBright• 3 months ago

In Seattle, the proposal for a government grocery store included exemption from paying property taxes and rent.

halflife16• 3 months ago

So they have an unfair advantage over the competition.

Or it’s just a way to neutralize the ineffectiveness of the management, since it’s not profitable based, who’s going to be fired?

bastawhiz4• 3 months ago

and let the discounts competitively pass unto the customers

This is the same trickle down economics principle that has proven not to work over, and over, and over again. There's exactly zero reason to believe these businesses would pass on the savings to consumers.

Consider! Ingles (a supermarket brand here in NC) is criticized for holding huge amounts of abandoned/vacant/dilapidated properties [0], which stifles competition and lets them hold an effective monopoly and makes neighborhoods objectively worse. It's not about the taxes. Don't underestimate a chain's ability to eat costs by maintaining their market position.

[0] https://avlwatchdog.org/opinion-ingles-markets-often-raises-...

halflife16• 3 months ago

I didn’t specify on the subsidies themselves.

You can create subsidies which are inverse to the stores income. It doesn’t HAVE to go to large chains. There are many way to encourage small businesses to open. Competing with them is not one.

wenc• 3 months ago

You're thinking a tax break which is an unconditional subsidy. That relies on the business passing savings through which folks are right to be skeptical about.

But that's not all subsidy mechanisms. The best ones are where pass-through is enforced, not assumed.

You already know of one that works: WIC. It lowers the effective price for customer, which the store receives as reimbursement.

It's not about trickle-down -- that's ideology. It's more about designing the right mechanism.

thinkingtoilet3• 3 months ago

Oh no! Struggling Americans will be able to buy food cheaper! What will we do?

Also, if anyone has any reservations about a government run grocery store, go ask your representatives to come out against military commissaries. I bet you will not be able to find one active politician who will try to remove that. You know why? Because government run grocery stores work. End of story. Period. There is no discussion. You are wrong if you disagree. We do this. It exists. It works. And people love it. Try to find one politician that will end that service.

halflife16• 3 months ago

Grocery costs has to come from some formula. If the mamdani stores actually do sell at a lower cost, where did the discount come from?

jmyeet2• 3 months ago

To anyone who espouses these claims that the government isn't capable of anything or that it's somehow a moral hazard I just have to ask: how's that working out for you in particular and society in general? Does it feel like things are going well?

What we have now is the result of unfettered private control. Private companies collude to raise prices and lower wages. The standard of living in real terms has been in decline for over 50 years. Education, medical, housing and food costs continue to spiral. Where we do have publicly owned alternatives, such as with municipal broadband, those publicly-owned alternatives are always far better.

Are we going to make the same argument that EPB in Chattanooga is somehow a moral hazard and has an unfair advantage to Verizon, AT&T, Comcast and Spectrum?

Let's just say that it's true that they do. Why is that a problem? Why is it good that billion or trillion dollar companies can charge higher prices than the government can so their owners can buy another mega-yacht at the expense of the people who depend on that service? Because that's what's going on now.

pollorollo2• 3 months ago

Government owned grocery stores already exist [1]. They are run by the U.S. military, have 200+ locations, and charge at least 25% less than other brands [1].

"Surveys consistently rate the commissaries as one of the military's top non-pay benefits." NYC wants to provide similar benefits for residents.

[1] https://en.wikipedia.org/wiki/Defense_Commissary_Agency [2] https://www.youtube.com/watch?v=PQOXdtPBGXI

gruez7• 3 months ago

From your own article:

In 2024, DeCA estimated that it saved patrons $1.58 billion and had an operations cost of $1.7 billion, $1.5 billion of which was funded from appropriations.[8]

Isn't this the "selling $1 for 75 cents" business model (aka moviepass) that people made fun of a few years ago?

hitekker• 3 months ago

The nyc subreddit which I'd say is pretty pro-Mamdani shared your concerns.

https://old.reddit.com/r/nyc/comments/1sjq9v9/mayor_zohran_m...

ModernMech4• 3 months ago

Who knows, let's try it and see. I've heard all my life about how new ideas are potentially not economically viable, so we keep trying old ideas which proven not economically viable. My feeling is that the economy is such a large, chaotic, dynamic system that most people, including experts, have no idea what is theoretically viable or not viable. So making decisions based on "my first order analysis is that this is not economically viable" is misguided. You have to try it first and see how the system actually responds.

MisterTea• 3 months ago

I wonder what the margin is on groceries and if the stores can sustain themselves by operating at cost. I also want to know how they plan to handle pricing during shortages, e.g. eggs.

ceejayoz22• 3 months ago

There are existing examples they can probably look to.

https://en.wikipedia.org/wiki/Defense_Commissary_Agency

flats• 3 months ago

I was very skeptical of these plans at first—as a New Yorker, I don’t exactly have a lot of trust in our city’s government to run things well.

But I’ve come around. Let’s try something new! Let’s show people that local governments in the United States really are capable of making a difference in their daily lives. If it fails, well, we tried & we’ll keep trying.

miketery4• 3 months ago

Just because we can does not mean we should.

Here's how this will pan out.

- A number of "officials" (friends) will get cushy jobs for running this program.

- It will lose millions of tax dollars

- a small portion of the population will get cheaper produce for a photo op

- Mamdani and friends will call it a success

- But net, this will be net negative for the city (ie. tax dollars to crony jobs and subsidizing food for some).

Whats the point? The USSR has tried this (subsidized grocery stores centrally planned). Lets not.

If on the other hand, the issue was hey its expensive to bring produce XYZ, so why don't we work to reduce that cost by legalizing Kei [1] trucks and exempt from tolls. Now that would be something interesting.

1 - https://en.wikipedia.org/wiki/Kei_truck

ceejayoz22• 3 months ago

The USSR has tried this. Lets not.

The USSR tried lots of things we do successfully.

This is actually something governments have a proven ability to do, at least in some contexts, without becoming a corrupt boondoggle.

https://en.wikipedia.org/wiki/Defense_Commissary_Agency

fortran772• 3 months ago

It also doesn't seem fair to compete against stores that have to pay rent and taxes.

whobenefits• 3 months ago

And even worse, last estimate I saw was 30 million to open a store! 30 million! Graft is alive and well. Communism is a dismal failure, and I don't want to live through it myself. Say no to communism.

darth_avocado3• 3 months ago

It will lose millions of tax dollars

As opposed to the millions that come out of your pocket on top of the taxes you pay? At least this brings some of the tax money back to the people. When you let grocery store price gouge you without competition, the money goes to executive pay and shareholder value.

woodruffw4• 3 months ago

NY Post wailing aside, it’s unclear that hizzoner has engaged in that much personal graft. There’s also no evidence presented that the staff of this program are being hired through a graft scheme.

You could be right about it losing millions of dollars, we’ll see. Millions isn’t very much on the scale of NYC’s civic infrastructure; it would be difficult to even call it a waste at that scale, since the results will themselves be valuable.

(This is in pointed contrast to our last mayor.)

bastawhiz4• 3 months ago

The USSR has tried this. Lets not.

The USSR fell before I spoke my first words. The world is a very different place, and the United States works very differently from the USSR.

At worst, some people will get some cheaper groceries out of this. If you want to get mad about government spending, maybe we shouldn't be building a ballroom attached to the White House.

kennywinker4• 3 months ago

Por que no los dos?

The kei truck thing might be a good idea, but so is groceries managed as a public service.

The USSR had a problem with corruption. Ok? There have been gov run groceries outside the USSR, and in recent times - not decades ago.

If you don’t have an example of this leading to corruption more recent than the USSR, i gotta assume it was a USSR problem, not a gov grocery problem.

DetroitThrow• 3 months ago

As an outsider, it will be interesting to see a pilot at minimum. I'd be hesitant for NYC if it rolled out massively expensive stores across the entire city without understanding if it succeeds at the small scale. I'm not sure why this succeeding or failing has to be viewed as a violation of a sacred value.

Governments should do more experiments, and this does seem to have been thought out enough to not be a total waste of money.

Freedom2• 3 months ago

I believe it's simple tribal behavior, combined with American blindness to a "free market". They'd rather be correct and put everything in a good / bad bucket instead of experimenting and learning from the experience.

hn_throwaway_99• 3 months ago

"Hey, let's try something new!" without a plan for success is just a recipe for failure.

I honestly don't understand the desire for municipal grocery stores at all. Grocery stores famously operate on super slim margins, so it's not like they're raking in the dough. Many of them are often run extremely well. In Texas, HEB is so beloved that a lot of people consider it far better at disaster recovery operations than the actual government.

I'm not against plans to better help people afford groceries, but somebody needs to at least explain how the plan is economically rationally viable, not just "let's try something new!"

itishappy• 3 months ago

Simple fix really, HEB should just open up stores up north.

hnthrowaway03153• 3 months ago

I have a feeling that those slim margins don't really mean that Walmart is making e.g. 3 bucks on every 100 bucks (https://www.macrotrends.net/stocks/charts/WMT/walmart/profit...).

There gotta be a lot of accounting magics working here. Otherwise you can't explain why they simply don't sell everything and buy bonds. I don't have a theory so hopefully some finance people can explain.

AnimalMuppet• 3 months ago

There are two errors.

Error 1: "Something must be done, this is something, therefore this must be done." Yeah, but "this" is something stupid, with no real-world chance of working.

Error 2: "We will not do anything until we can prove that it will work." You can analyze things to death and waste years in the process, and never do anything.

Somewhere in between is the right answer. You see plausible success, but still far from certain. Then you experiment.

Now, is New York striking the right balance? I have no idea. I'm not privy to their internal discussions. But I know that, if it fails, everyone is going to mock them for trying. That is, everyone is going to assume they fell into error 1. But did they? Getting the balance right still means that the experiments fail a fair amount of the time.

ck2• 3 months ago

"let's try it" is exactly the right attitude

So many conservative states and cities absolutely running things into the ground, making people miserable and oppressed and their cost of living skyrocketing for years, decades, look at Texas look at Florida, so many examples

So why not try something progressive for a change and see what happens?

Why the heck not just try?

steanne• 3 months ago

and make it a good try, too. you can't improve your situation a little by jumping halfway over a hole.

bparsons• 3 months ago

The government already runs/oversees a variety of public grocery stores. Including:

- Armed forces commissaries. The op ex is subsidized by the taxpayer, but the cost of goods reflects the market wholesale price, plus a 5% fee to pay for capital goods/facilities upkeep.

- Grocery stores run by non-profits/charities. Eligible donations are a tax deduction, which represents a form of subsidy by the taxpayer. These stores are really popular in some places in the US.

- Food banks. Operate on a mix of private donations and taxpayer grants/tax receipts to some donors.

It all amounts to the same thing. The finance model is different in each case, but its all taxpayer supported no matter how you look at it.

bastawhiz4• 3 months ago

I'm not opposed to this, but I'd rather have seen incentives and subsidies for local co-ops to succeed in this space. That's probably harder than it sounds, though.

energy1232• 3 months ago

Dumb populist idea, grocery stores make 2% margins, best case scenario you're saving people 2%, realistic scenario you introduce operational inefficiencies that the chains already optimized out and waste taxpayer resources.

If you don't like grocery stores gamifying or selling junk, regulate those aspects. Or put the taxpayer money towards something useful like building public housing.

legobmw99• 3 months ago

You’re not putting a municipal grocery store on the same block as an existing big box and saying “wow, savings!”

Food deserts exist in NYC, and many New Yorkers buy staples at corner stores that charge significantly more than a standard grocery store. Your second paragraph implies that this policy is due to some dislike of existing grocery stores, but that assumes these communities are actually being currently served by grocers at all

energy1232• 3 months ago

Those corner stores exist in a perfectly competitive market, they have low turnover so they have to charger higher prices to pay staff wages and rent. There are no abnormal profits. Why would you set up a government run store with more operational inefficiencies and less ability to respond to the local knowledge problem, than like give money or food stamps to people in these areas, or use the money in some other way?

thelastgallon• 3 months ago

Don’t do these kinds of idiotic things. Do what Singapore does for housing.

ceejayoz22• 3 months ago

Singapore's largest grocery chain is a co-op run by the country's labor unions, which are closely aligned with the government.

https://en.wikipedia.org/wiki/NTUC_FairPrice

oa3353• 3 months ago

This is Mamdani’s worst idea. Margins on most essential goods in grocery stores is incredibly low, sometimes it’s a loss leader. Does anyone know of any solid economic rationale for this move?

woodruffw4• 3 months ago

The underlying theory is to put these stores in areas that otherwise lack grocery store access, meaning they won’t compete with existing stores for small margins. Running at a (moderate) loss would also be politically acceptable; the city runs a lot of things at a loss for civic purposes and fills the gaps with taxes.

(This is the theory, the practice will be challenged by NYC’s ability to acquire land in neighborhoods that are underserved by groceries and develop a supply chain for these stores. This will be harder, but I personally don’t vote for mayors to only have easy problems to solve.)

oa3353• 3 months ago

The underlying theory is to put these stores in areas that otherwise lack grocery store access,

I’m generally partial to that motivation - however doesn’t seem to be happening here.

This location (La Marqueta) is within a couple hundred feet of a "City Fresh Market" grocery store and ~1500 from several other grocery stores

https://www.google.com/maps/search/grocery+store/@40.7983886...

rdtsc2• 3 months ago

“Some will insist that city-owned businesses do not work, that government cannot keep up with corporations. My answer to them is simple: I look forward to the competition. May the most affordable grocery store win,” Mamdani said.

Well it's interesting enough to try. Are they going to keep the stores open at a loss, that's not really competing then, is it?

If they sell things that are much cheaper, restaurants could start sourcing their food from there, too. Why get your chicken from some supplier if you can buy it from a cheaper government run store at much less.

But then, if these stores are not run at a loss, it means somehow there is this large inefficiency that other stores haven't tapped into. And if I had to guess, grocery stores don't seem like a large margin business, but perhaps that's just my ignorance as it's not something I ever looked into in detail.

ceejayoz22• 3 months ago

If they sell things that are much cheaper, restaurants could start sourcing their food from there, too. Why get your chicken from some supplier if you can buy it from a cheaper government run store at much less.

Restaurants already do this. They buy from wholesalers, because they're cheaper than the grocery store.

rdtsc2• 3 months ago

Restaurants already do this. They buy from wholesalers, because they're cheaper than the grocery store.

But now grocery stores could be cheaper than wholesalers if there are any subsidies involved or selling at a loss is a thing. Why go to wholesalers when you can camp out with a van by the government subsidized stores when it opens or when delivery comes.

Not saying this is insurmountable, the stores can implement a purchase quota: you get X amount of items per transaction and we take your ID or something. But it opens up that kind of a situation. Like I said, I hope it works, it would be interesting to watch.

scoofy6• 3 months ago

It's a question of volume. If they're really going to sell things at a loss, then it should create real demand. If you have that demand, then you're going to start running out of groceries mid-day. At that point, the business sucks because you either have to show up at 10 AM to buy anything, or they start some ridiculous rationing program to prevent people and businesses effectively reselling at market rates, or they make up for their negative margins by increasing their volume and losing even more money.

It's a low margin, high volume business. I'm extremely skeptical that this plan works beyond just being a politically popular way to light money on fire. I say that as someone who actually like Mamdani.

ceejayoz22• 3 months ago

What if it was possible to stock products during the day?

orwin2• 3 months ago

Store are low margin businesses, unless they own the walls. In this case, what often happens is that when he retires, the owner keeps the walls but sells the business. The walls are put in an asset portfolio, while the poor bastard who bought the business see their renting cost climbing. And that's not talking about the buying group whose margin grow YoY while the shop margin goes down.

bherms2• 3 months ago

Many people losing their minds over stuff like this... I'm just glad some people are finally trying out new ideas, because the status quo is not working for a large portion of the American population.

I just hope they properly track and monitor the outcomes and foster honest/open feedback. The gov't loves to throw money at problems, but never really does much to analyze, pivot, or admit when something doesn't work because that just gives the opposition ammo.

Molitor5901• 3 months ago

If you're interested in grocery store economics, I strongly recommend:

The Secret Life of Groceries: The Dark Miracle of the American Supermarket by Benjamin Lorr, and

Grocery: The Buying and Selling of Food in America by Michael Ruhlman

Extremely insightful about how much it cost to run a grocery store, where profits go, who the food suppliers really are, etc. Very eyeopening.

robotnikman• 3 months ago

Are they looking to hire any software engineers right now?

euroderf• 3 months ago

I visited Soviet Estonia in 1987, on an overnight from Helsinki. A treasured purchase was a simple stamped metal bottle opener. Even the price was stamped: 15 kopecks.

This told me that for the very simplest consumer items, they might easily be contracted out and sold at just above production cost. Consumers would be free to buy fancier bottle openers, but sometimes a hunk of stamped metal does the trick.

Likewise for many other consumer basics ? Like, a Gotham store brand ?

NYC to open municipal grocery store in 2027

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