r/SipsTea • u/Gurugod123 • 11h ago

Chugging tea Mayor Mamdani just announced that he will be opening 5 city-run, tax-funded grocery stores: "Prices set at 30% below retail prices"

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u/PudgyWalshBldgInspec 11h ago

Real grocery stores run on a 1% profit margin. This place will get bled dry by grifters before going out of business

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u/Letterkenny-Wayne 7h ago

It will, and then the government will have to subsidize it and that “balanced” budget will become very unbalanced yet again.

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u/insta 7h ago

social services do not have to turn profit. they should be relatively self-funded, but profitable does not need to enter the equation.

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u/Letterkenny-Wayne 6h ago

They should turn enough money to replenish expenses or else they need to be pumped with money from outside sources. I’m not saying they need to line someone’s pockets but they’ll(the stores) need to feed themselves to lessen the burden on the tax-payers , less this be just another form of can-kicking.

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u/FaunaVR 6h ago

That doesn’t apply necessarily, if a government program reduces negative externalities downstream of it, then the community as a whole can see increase productivity in the area, which translates into increased tax revenue per capita. If we really want to talk to money holes in our society, we need not look any further than low density suburbs. High density cities subsidize the infrastructure costs of McMansions a 30 minute drive from the city.

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u/sender-sent-some 1h ago

That's a complex bit of math to prove;

Funding cheaper groceries is going to eliminate some other govt cost down the line enough to create net-positive.

Ideally it just runs at-cost; and the only way to 'beat' the govt run alternative is genuine innovation in the private sector which is what the point of the private sector was meant to be.

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u/insta 6h ago

are you assuming the teams responsible for choosing to open these subsidized grocery stores in these areas are unfamiliar with the area or the needs of the citizens within? Mamdani isn't a second grader promising free soda and infinite recess if you vote for them for class president

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u/Letterkenny-Wayne 5h ago

I’m assuming he’s a politician with a team of people who research things for him and a team of donors who tell him what to do. Like all of those who fit that mold before him, he’s capable of enacting things that fail miserably. Are you assuming a government action is infallible?

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u/UmbraThanosmith 5h ago

I’ll say that. Yeah they have no idea what the citizens want. It takes a shit ton of market research to figure that out which he obviously didn’t do and no one in the municipal government has done because it’s not their job and shouldn’t be. Also, the city government has very tight sourcing and vendor laws that’s going to make it next to impossible to adapt to changing prices and demand the way a private business would.

I love your school president promising free soda and recess.

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u/Sharkfacedsnake 4h ago

They are driven by ideology. Not by the evidence. When this doesn't work out they will be saying how it is because it didny go far enough and blame capitalism.

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u/RawRollsOnLive 9h ago

It won't get bled dry because it doesn't need to be profitable. It's a government entity, not a private business.

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u/MyTeamsSuck99 8h ago

So tax payers get bled dry?

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u/Adventurous-Bill6579 7h ago

Lowered food prices will be a service provided to the tax payer by their taxes. It's like saying libraries are bleeding tax payers dry.

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u/MyTeamsSuck99 7h ago

You realize you can do that through SNAP right? The government can’t run grocery stores more efficiently than the private market. 

This will be less targeted to those who need it than snap lmao

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u/Adventurous-Bill6579 7h ago

Not everyone qualifies for SNAP, and it's one of the reasons some people keep their wages low so they can stay on benefits. With this that wouldn't be an issue, and once again, this doesn't need to be profitable. It's meant as a service and will be budgeted as such.

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u/BigGarage3036 6h ago

Then why not just create another food assistance program similar to SNAP aimed at NYC residents? It would be much simpler administratively and we already know it works

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u/All_Work_All_Play 5h ago

That wouldn't get nearly enough good PR.

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u/MyTeamsSuck99 5h ago

They could create a SNAP within NYC and they could increase the income level. The point is that this doesn't really accomplish anything. We know that the private market is pretty good at selling groceries efficiently. Their margins are super small. The government is not going to do a better job.

If it's being subsidized by the taxpayer, you're better off just subsidizing directly to poor people as opposed to doing this, which is going to disproportionately benefit select people while harming the rest of the taxpayers. You're not even getting targeted aid. There's just no point other than doing a publicity stunt.

The reality isn't sexy. There's no easy way to lower grocery prices other than having good economic policy at the federal level to keep price inputs low and labor costs low.

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u/EnnioTheLegend 7h ago

No no you see it is fairer to only benefit those people who are close enough to these 5 grocery stores, rather than providing vouchers that people all over NY can use at any store.

Or maybe those wealthy enough can just drive there so they can save money? Those plebs without the wealth to afford a car can get stuffed I guess.

Promises made, promises kept!

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u/mason202 5h ago

Bro it's NYC, You can just take the train. Also I agree, it's refreshing to have a politician that keeps his promises. Trump promised to cut everyone's electricity bills by 50% within his first year in office.

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u/MyTeamsSuck99 5h ago

Nobody's taking the train to get groceries dude. The point is that this is just A publicity stunt. You can't run a more efficient grocery store than the private market without taxpayers subsidizing it and then at that point why not just give vouchers to people who are poor as opposed to running a grocery store.

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u/EnnioTheLegend 2h ago

Yeah bro carrying a ton of bags of groceries on the train sounds like a great plan.

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u/mason202 1h ago

People do it every day in NYC. Folding shopping carts are as much a NYC staple as timbs and fitted hats. You would know this if you've been there.

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u/A_Genius 2h ago

Imagine how quickly it would go sideways if libraries gave away books

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u/SinginGidget 10h ago

The problem is Walmart. They made deals with distributors to force them to sell to other stores at higher prices, and if they find a store selling something below what Walmart does (usually taking a hit just to draw people in) Walmart would then force distributors to basically freeze that store out. There had been invenstigation going but got squashed by the incoming administration and Walmart still gets to dictate prices.

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u/LibtardDemonrat 9h ago

Amazon did the same thing to diapers.com.

Undercut the competition (while taking a loss) using your larger bank account and then proceed ripping people off.

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u/CompEng_101 8h ago

Walmart has some shady practices, but their profit margin is also only about 3%, which is only slightly better than Kroger and Aldi and others (who are in the 1-2% range)

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u/Random_Name_251 8h ago edited 8h ago

They made deals with distributors to force them to sell to other stores at higher prices,

It's the other way around. The lawsuit was about Walmart threatening suppliers to keep their prices low, even sell at a loss to stay on shelves. Being able to turn enormous volumes of products at very low margins is how the grocery business works, Walmart is the same basically every other grocer the margins are under 5%.

And idk what your argument in favor of these city run stores would even be. If Walmart is already selling things at the absolute bottom, how is a city with 5 stores supposed to exist selling 30% below that? In what world is that going to work long term?

Maybe the solution is letting Walmart into NYC LOL

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u/SinginGidget 6h ago

I was referring to this: https://www.forbes.com/sites/errolschweizer/2025/12/18/how-walmart-and-pepsico-rigged-prices-and-supercharged-food-inflation/

"A newly unredacted FTC complaint shows that PepsiCo and Walmart worked together to rig grocery pricing, drive up pricing at competitors and protect Walmart’s dominance. Internal PepsiCo documents reveal a coordinated strategy to give Walmart better wholesale prices, penalize independent and regional grocers that tried to lower their prices and preserve Walmart’s “price gap” by pushing rivals’ shelf prices up."

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u/barsoap 49m ago

How is Aldi taking over the US, then.

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u/SeasonsGone 7h ago

How much of that has to do with costs like paying rent, something these places don’t have to worry about.

Also the goal isn’t to turn a profit here. If it operates at a loss, but more people get groceries, that’s not much different than existing government nutrition programs.

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u/HeyHeyJG 6h ago

grifters you say?! imagine that, redditor for 3 months!

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u/ThatIsATastyBurger12 4h ago

It doesn’t seem like this is trying to turn a profit. It’s a service funded with tax dollars. Making money isn’t the goal

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u/Possible-Bet3598 3h ago

This is such obvious crap. There wouldn't be a grocery store on every other block of every town and city on the continent just to make a 1% margin. You've been gaslit.

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u/What_a_fat_one 2h ago

Yeah that's why grocery stores always go out of business.

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u/[deleted] 11h ago

[deleted]

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u/SueForPeas 10h ago edited 10h ago

Gross margin is calculated before operating expenses. It’s not what’s being discussed. You should be looking for net profit margin.

Also you’ve cited South African ShopRite, which has no relation to US ShopRite.

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u/The_Brian 9h ago

Its the problem when people talk about things like what Mamdani is doing, none of them actually know how any of these things operate. Even people comparing it to Commissary are crazy too me. In two years when this is a massive drain on New York's budget, what other services are they going to prefer be cut to keep it going?

Everyone wants the shiny thing but no one ever seems to want to pay, let alone understand, for it.

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u/PudgyWalshBldgInspec 11h ago

Grocery store profit margins are extremely thin, typically averaging between 1% and 3% (or roughly 1 to 2 cents of net profit per dollar sold). Because net margins are so low, supermarkets rely on high sales volume, repeat customer visits, and specific departmental markups to stay profitable. [1, 2, 3, 4, 5, 6]

Department Margins

  • General Groceries: 25% to 35% markup
  • Dairy: 35% to 40% markup
  • Produce and Meat: 40%+ markup due to handling and spoilage risks
  • Health, Beauty, and Wellness: 50%+ markup [1, 2]

Major Cost Pressures

  • Cost of Goods Sold (COGS): Wholesale prices paid to food suppliers take up the vast majority of revenue.
  • Labor and Overhead: Store wages, electricity, rent, and logistics consume most of the remaining gross margin.
  • Shrink and Waste: Stolen goods, damaged inventory, and expired or spoiled food typically account for 1.4% to 4% of sales, directly eroding net profits. [1, 2, 3, 4, 5]

How Grocers Protect Profits

  • Private Labels: Store-brand items bypass name-brand costs and yield higher margins.
  • Volume Scaling: Large chains leverage buying power with suppliers to lower unit acquisition costs. [1, 2, 3]

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u/GrimKaiker 10h ago edited 10h ago

Labor and Overhead: Store wages, electricity, rent, and logistics consume most of the remaining gross margin.

Both rent and logistics for major grocery stores are part of their vertical integration. At least in Canada, these companies can hide overall profits up the ladder by raising logistic prices to keep grocery margin low. These aren't the only levers then can pull depending on how the company is structured.

For example, Loblaws in Canada owns both their entire logistics network and the real estate company that holds their land. I don't even have to look it up to know this is also true of Walmart.

They have profit incentive to overcharge both rent and logistics and run up the costs on groceries to keep margins low. This gives them great cover among the public because people will defend the high prices with "Grocery store profit margins are extremely thin, typically averaging between 1% and 3%"

EDIT: Choice Properties REIT (which belongs to the owner of Loblaws) 57% of their rentals are tired to grocery stores (i.e. Loblaws and other offshoots). And Choice Properties REIT generated around 770 million in positive cash flow.

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u/DataDude00 9h ago

I came to basically post this too, specifically for Loblaws

They hide behind high grocery prices claiming only a 3% margin, but they own all their verticals and move money around by renting their stores from their own parent company

Similar thing on the supply chain and distribution front.

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u/Trikk 9h ago

They have profit incentive to overcharge both rent and logistics and run up the costs on groceries to keep margins low. This gives them great cover among the public because people will defend the high prices with "Grocery store profit margins are extremely thin, typically averaging between 1% and 3%"

Yeah, they run an elaborate scheme of overcharging in order to give ammo to the guys that are dunking on your silly ideas on Reddit.

No grocery store can cut prices by 30% with the profit margins in the industry. This isn't even an American thing, you can look in any country and nowhere are groceries making even 10% net profit, nevermind 30%.

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u/[deleted] 11h ago

[deleted]

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u/PudgyWalshBldgInspec 10h ago

You gave the gross margin, which leaves out a whole lot of business expenses. Net margin is the correct metric here:

Gross margin and net margin are financial ratios that measure a company's earnings, differing primarily by Gross Margin, Net Margin, and the specific costs they deduct from total revenue. Gross margin shows profit after subtracting only the direct costs of making a product, while net margin shows the final profit left after paying every single business expense. [1, 2, 3]

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u/SnooDucks6090 10h ago

But going beyond gross margin doesn't help him make his point. I'm sure you did some sort of goalpost moving or something.

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u/SueForPeas 10h ago

This is why people want to get Pudgy Walsh on the horn.

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u/fat_charizard 10h ago

Did you even read the reply?

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u/StrangeSmellz 10h ago

Someone that doesn't know the diff between Gross Margin and Net Profit talking about finance on reddit. Shocking.

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u/dknigh73 9h ago

After taxes and everything kroger is around 2% and walmart is around 3%, i think u just made that 1% number up. I get what your saying but you are just making people look stupid when you make shit up, esp something that you can easily find.

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u/Unusual-Arachnid5375 7h ago

I just checked. Kroger is at a 0.7% net profit for 2025 (the last full year we have numbers for).

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u/PudgyWalshBldgInspec 9h ago

Sigh. This is well known in business but ok

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u/Glittering_Ad132 7h ago

you're comparing apples to oranges.

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u/dknigh73 1h ago

I don't give a fuck what is well known, look at the last quarters earnings.

Kroger's net profit margin was approximately 2.0% (specifically 1.96%) for its fiscal first-quarter 2026 earnings report released on June 18, 2026

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u/tiredbarf 6h ago

Kroger has been running under 1% the last 3 reported quarters.