The Atlantic has an excellent piece in which it points out some basic inconsistencies in the proposals being put forth by New York City mayoral candidate Zohran Mamdani – a self-described Democratic socialist – to open “five city-owned stores that will be ‘focused on keeping prices low’ rather than making a profit – what he calls a ‘public option’ for groceries.”
Here’s one:
“Mamdani’s desire to reduce grocery prices for New Yorkers is undercut most glaringly by the labor policies that he champions. Labor is the largest fixed cost for grocery stores. Right now grocery-store chains with lots of New York locations, such as Stop & Shop and Key Food, advertise entry-level positions at or near the city’s minimum wage of $16.50 an hour. Mamdani has proposed to almost double the minimum wage in New York City to $30 an hour by 2030; after that, additional increases would be indexed to inflation or productivity growth, whichever is higher. Perhaps existing grocery workers are underpaid; perhaps workers at city-run stores should make $30 an hour too. Yet a wage increase would all but guarantee more expensive groceries. Voters deserve to know whether he’ll prioritize cheaper groceries or better-paid workers.”
In addition, The Atlantic points out, Mamdani has called for “‘a four-day, 32-hour work week with no reduction in wages or benefits’ for all workers.” Putting aside whether or not the city of New York could force all companies to provide this benefit to all workers (does that include folks who work at hedge funds?), putting such programs into place for the employees of city-owned grocery stores would, by definition, raise costs. Which, unless he intends to run these stores at a loss, would raise prices.
And, the story notes, “shoplifting has surged in New York in recent years. Many privately owned grocery stores hire security guards, use video surveillance, call police on shoplifters, and urge that shoplifters be prosecuted. Democratic socialists generally favor less policing and surveilling. If the security strategy that’s best for the bottom line comes into conflict with progressive values, what will Mamdani prioritize?”
Meanwhile, the Washington Post has a piece about how, “as grocery prices continue to climb and 7 million Americans face losing federal food assistance, more cities and states across the country — in Illinois, Georgia and Wisconsin — are experimenting with the concept of publicly supported grocery stores as a way to help provide for low-income neighborhoods.”
However, the Post writes, “these experiments … often don’t account for social issues that can make success even more challenging. Critics say the efforts are unrealistic regardless because grocery stores have such slim profit margins and struggle to compete with the prices offered by big-box chains like Walmart. High-profile projects have failed in recent months in Florida and Massachusetts.”
And in Kansas City. The Post points to KC Sun Fresh, a store that was “the city’s attempt to alleviate a lack of access to healthy food in its urban center. But the store, in a city-owned strip mall, is on the verge of closure. Customers say they are increasingly afraid to shop there — even with visible police patrols — because of drug dealing, theft and vagrancy both inside and outside the store and the public library across the street.
“KC Sun Fresh lost $885,000 last year and now has only about 4,000 shoppers a week. That’s down from 14,000 a few years ago, according to Emmet Pierson Jr., who leads Community Builders of Kansas City, the nonprofit that leases the site from the city. Despite a recent $750,000 cash infusion from the city, the shelves are almost bare.”
The failures have not stopped the city of Minneapolis from exploring this path. Fox News reports that the Minneapolis City Council’s Public Health and Safety committee has been exploring “the idea of government-owned grocery stores as a tool to combat the city’s problem of food insecurity and food deserts.”
The story quotes Pat Garofalo, president of the Minnesota Grocers’ Association and a former state lawmaker, as saying, “This is the exact opposite of what the city of Minneapolis needs right now. They are sending the message that anyone who comes to Minneapolis now has to compete with the government. It’s a horrible idea.”
KC’s View:
To me, there is no question that what mayors and city councils should be focusing on is creating urban environments in which existing food retailers can run stores that are accessible, safe and profitable. As I’ve said here before, it is hard to run a grocery store under the best of circumstances, and it makes no sense for public institutions with no expertise in this area to start running before they’ve even had a chance to crawl.
I would like to make a larger point, though. The vast majority of people in this country have absolutely no understanding of how supermarkets – the store format they visit and patronize the most frequently – operate. They don’t have any appreciation fore the cost of labor, or of goods. They don’t understand supply chains, and how complex the mechanism is that gets products into stores so they can be bought and brought home. They don’t understand what it takes to open and run a store each day nor, at the other end of the spectrum, how work is performed (and who the people are who perform it) in America’s fields, processing plants, and warehouses.
I think the US supermarket industry has quite frankly done a lousy job of telling their own story. People just don’t get it, and the industry has no right to expect that they could or should.
Back in 2023, the dunnhumby Consumer Trends Tracker reported that “Americans believe that grocery retailers are earning a 35.2% net profit margin, 14 times higher than grocers’ actual net profit margin average of 2.5%, and that food-at-home inflation is 24.3%, double the annual rate reported by the U.S. Bureau of Labor Statistics.”
This should have set off alarm bells within the industry, but I haven’t seen retailers or trade associations engaged in educational efforts designed to explain reality to their shoppers.
No wonder some people think they can do it better.
The industry has nobody to blame but itself for these delusions.
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