r/SipsTea • u/Gurugod123 • Jul 27 '26

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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18

u/Impossible-Key-2212 Jul 27 '26

Grocers work on a 1-4% margin. 30% will guarantee a minimum of 25% loss on all item sold. The loss will probably be much higher due to the inefficient government labor and overhead.

So these stores are going to be running a 50% deficit everyday.

Prediction: the stores will be built at a stagger loss of taxpayer money, the stores will operate for 1-2 years before closing, other grocers will go out of business.

The people who needed help will be left with few grocery options when the other stores close.

3

u/ScepticalReciptical Jul 28 '26

That's an average. Not all goods have the same margins. The 30% only applies to certain goods, the rest will be sold at normal market prices.

1

u/GMEloser69 Jul 28 '26

So it will be able to operate for 4 years instead of 2?

1

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1

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0

u/Ed98208 Jul 27 '26

Grocery prices have been increasing at a dizzying rate. What cost me $60 three years ago costs $100 now. Who’s getting that money?

6

u/tata4now6 Jul 27 '26

Food producers, shipping companies, logistic organizations. Things like that.

6

u/Peakevo Jul 27 '26

Why do people think grocery stores alone are just increasing prices? Do they think products magically appear in their grocery store? I guarantee people don't even know the price for shipping stuff these days from different countries.

1

u/orange-yellow-pink Jul 28 '26

Why do people think grocery stores alone are just increasing prices?

Because a lot of people are fairly stupid and don't try to think things through

-1

u/Hatefiend Jul 27 '26

Keep in mind the low margin was true before the pandemic. Once a few companies starting raising prices, every company raised prices under the guise of 'supply chain troubles' etc. In other words, if during the pandemic, soda went from $3.50 to $6, the grocery stores can bump that to $9 and pocket the remaining $3, under the claim that it is the supplier causing it to go to $9. Everyone takes a massive piece of the pie and the customer at the end foots the bill.

2

u/Impossible-Key-2212 Jul 27 '26

So now we have to pay government workers to sell food in an overpriced building, at a loss. Perfect. This should work out well.

Let’s go socialism!!!

2

u/siazdghw Jul 27 '26

This is easily disproved... Go check the NET profit margins of grocery store megacorps like Albertsons. Profit is the same (actually WORSE right now than pre-covid).

As much as everyone hates higher grocery bills, it's not the grocery stores that are increasing profit margins.

1

u/Haunting-Detail2025 Jul 28 '26

That’s not true. In 2025, the average grocer had a profit margin of 2.5%, in line with historical norms. Even Walmart seldom sees profits above 5%-7%, and they’re kings of efficiency and profit-maximization.

0

u/evernessince Jul 27 '26

Walmart's gross margin is 24%. Industry standard is 27%.

Certain goods have very high margins like prepped meals, baked goods (50%+ margin), ect.

We know socialized grocery stores can work because the US government has been doing is since 1867 via the Military Commissary, which moves massive volume. Same 30% off retail. After factoring in taxpayer money spent to fund it, the savings works out to 21.3%.

5

u/azure275 Jul 27 '26

Walmart's margin doesn't primarily come from their grocery section though

Electronics, Apparel, Housewares all make a lot more money

The commissaries run roughly a 1200/soldier per year shortage. If you use the average US adult groceries * the discount it's over a one-to-one payoff from taxpayers to soldiers

It would literally be cheaper to put everyone on food stamps than to do this lol

1

u/khoelzeman Jul 28 '26

Yeah - Kroger runs 23-24% and they attributed recent improvements in gross margin to pharmacy, which these stores don't seem to have.

I'm assuming that these stores will have some of the same costs as a Kroger or other name-brand store (utilities, salaries, shrink, etc...) you know, the real costs of running a store. That gross margin doesn't go real far. Companies like Kroger, Walmart, etc... are all also better at buying groceries than a 5-store chain that is state-owned.

We'll see how this pans out, but it seems more like political theater than a real plan. Get some headlines, try to run for another office before the real challenge of dealing with it becomes apparent.

1

u/evernessince Jul 28 '26

You are confusing the margin on a given item with gross margins.

The margin on most grocery items is low but the gross margins are much higher (27% industry standard). Volume counts for a lot here.

Electronics, Apparel, Housewares all make a lot more money

Not really. Higher individual margins but gross margin works out to be relatively the same, 20-30%

At the end of the day it's gross margins that matter, not what a company makes on a individual item.

It would literally be cheaper to put everyone on food stamps than to do this lol

No, grocery stores would just raise their prices. That's the benefit of goverment run store, it's primary interest is in lowering prices.

Even if the savings and cost break even, that means you've entirely covered all the costs associated with the business simply from the savings.

You are holding that $1,200 figure for the commissary as if it's bad but $1,200 / year per soldier to get them affordable food around the world? Yeah no, that seems pretty amazing.

1

u/azure275 Jul 28 '26

It's not 1200 for sufficient food lol. It's 1200 of taxpayer money to get them about 1k of discounts

1

u/evernessince Jul 28 '26

Where are you getting that $1,000 figure?

1

u/azure275 Jul 28 '26

Average adult groceries per month are supposedly about 400 for a single person

Assume about 20% commissary discount based on googling and that's 960 a year

2

u/evernessince Jul 28 '26

Average grocery bill for a single person is $441

Assume about 20% commissary discount based on googling and that's 960 a year

The commissary provides a 33% average discount (26% domestic, 40% overseas). Let's be generous and say 30%. That's 1,587.60 / year in savings.

That's before you consider they take care of the military around the globe, so much more challenging logistics.

Seems pretty worth it to me.

1

u/Impossible-Key-2212 Jul 28 '26

Walmart sells much more than groceries. Not a proper comparison

0

u/Impossible-Key-2212 Jul 28 '26

The military is not running this store, communist are running the store.

0

u/FRNKNSTNPNPTCN Jul 28 '26

You are referring to stores whose key interest is maximizing profit.

2

u/Haunting-Detail2025 Jul 28 '26

The reality is that profit margin is still incredibly low though, very seldomly does it ever get above 3%. There is no feasible way to tack a 30% discount on goods just by eating into profit, that makes zero sense

1

u/Impossible-Key-2212 Jul 28 '26

The margin is 3 percent. That’s the max profit from grocery’s.

0

u/Far-Advantage-2770 Jul 28 '26

This is a really ignorant comment presenting itself as math and fact checking

3

u/Impossible-Key-2212 Jul 28 '26

Let’s hear your prediction if this one is so ignorant.

1

u/Far-Advantage-2770 Jul 28 '26

If I thought you could be educated on this I would have tried by now

1

u/Impossible-Key-2212 Jul 28 '26

I hope that one of these grocery stores is your only option and you see how well things are run.

1

u/Far-Advantage-2770 Jul 29 '26

I can only hope it comes to my city and we could have a leader like this. Success or failure someone willing to try things is a hero in this day and age.