Mamdani Grocery Store
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New York City Mayor Zohran Mamdani’s $124.7 billion budget includes one of the city’s most unusual experiments in recent memory: five city‑run grocery stores that will sell staple foods at a 30% discount. Supporters see a targeted affordability measure, while economists warn the model could reshape pricing, competition and the small-business ecosystem that keeps food accessible in many neighborhoods. As the first store moves toward opening, the question is whether this intervention will expand access or introduce new market pressures.
What Mamdani’s Grocery Plan Actually Builds
As part of Mamdani’s $124.7 billion budget, starting this year, New York City will build and open five stores, one per borough. The first will open in the Bronx by the end of 2027, and a second is planned for East Harlem’s La Marqueta market by 2029.
The main feature of these stores is that a core basket of goods — including produce, dairy, bread, select meat and seafood products and about 20 other staples — will be priced 30% below typical retail values. According to The New York Times, these prices will stay locked in for a month, and non-core items will sell at a designated fair market value.
These stores can offer prices at this level because of their lower cost structure. Unlike bodegas, the city-run grocery stores will not pay rent or property taxes. Government-owned property is typically tax-exempt in the same way that libraries, courthouses, and DMVs do not pay property tax. Thus, this foregone tax revenue provides an inherent cost advantage relative to other grocery providers. Still, the effect on the city’s bottom line is real: forgone revenue has to be made up elsewhere, or absorbed as a cost. The city is also covering construction and buildout costs via taxpayer dollars, meaning these stores will not face the same upfront capital costs as private competitors. And unlike other businesses that fail to generate profits and go bankrupt, any financial shortfalls from these stores will be absorbed by the city. This means that any losses will ultimately be borne by New York City taxpayers.
State and local appropriations for a shared public good are not new to society. For instance, airports, highways, and parks are not typically built and owned by private businesses. Grocery stores do not require unusual upfront investment and can typically be operated at a profit without government intervention. Conventional public economics suggests that the very same logic of government intervention may not apply to grocery stores. However, those in favor of Mamdani’s plan would counter that the presence of food deserts represents their own kind of market failure. Private grocers are underserving low-income neighborhoods because the margins don’t justify staying open there. Whether that argument holds up is likely to be one of the more contested questions as the stores open.
There are several examples of city-owned grocery stores in the U.S. in recent years, according to Modern Retail. For instance, in Baldwin, Florida, the town’s only grocery store closed down, and the government built its own store so residents would not go without food. A similar story unfolded in Erie, Kansas. Both stores ceased operations in 2024 due to finances. Other cities, like Chicago, Illinois, and Kansas City, Missouri, have explored the possibility of city-run grocery stores and either never launched or are struggling. The common reason that these stores seem to become implausible is simple economics – supply and demand in an industry with a lot of competition and razor-thin margins make these stores implausible. It is this simple economics that begs the question of whether New York City will be any different.
The Top Economic Concerns For Mamdani’s City-Run Grocery Stores
Among the chief concerns surrounding these stores is that the money will have to come from somewhere. For these stores, that source is New York City taxpayers – twice. First, the taxpayers will be providing about $70 million for the buildouts (with $30 million alone going to the East Harlem store). However, the higher cost could be the ongoing expenses to allow food to be sold at 30% under fair market value. Grocery stores typically operate between 1% and 3% profit margins on goods sold. Even eliminating profit margins, rent, and property taxes entirely likely will not cover a 30% price cut on its own. These potential ongoing operating losses, which would otherwise bankrupt a business, will instead be absorbed by the city itself. For the average New Yorker, these operating costs may come in the form of higher property taxes or income taxes. Thus, New York City taxpayers will potentially see the costs on two different fronts.
Second, if New Yorkers can get their groceries for 30% less at one store, they are unlikely to go to a different store and pay more. Basic economic theory suggests that when a competitor does not have to cover these other costs (i.e., rent, property taxes, or bankruptcy risk), it can sustain prices that competitors cannot match. New York City has approximately 13,000 bodegas, and these are not typically characterized as lavish businesses with excess profits. Instead, they are operating on very small margins, and many located near the proposed city-run grocery stores may face financial hardship if they need to lower prices to compete. If these stores go out of business, then it could create food deserts, yielding the opposite effect of what was intended.
Third, and potentially most harmful, is what happens if those bodegas close. Basic economics suggests that as the supply of food via grocery stores diminishes, prices rise. The key notion here is that the Mamdani-backed grocery stores will offer 30% cheaper prices than fair market value. However, if the fair market value of groceries rises due to the bodegas closing, then the 30% discount may not end up being a discount at all. In an illustrative example, if the fair market value for a gallon of milk is $4.00, Mamdani’s stores will sell it for $2.80 (30% less). However, if many bodegas close and the demand for milk rises, the remaining bodegas may increase the price of milk to $6.00. In this case, Mamdani’s stores will still offer the milk at a 30% discount. However, the discounted price ($4.20) is now more than the original price without the city-run grocery stores.
Why Concerns About Mamdani’s City-Run Grocery Stores Might Be Overblown
Despite some of the economic concerns, there are many reasons why the stores could still be successful. First, it is unlikely that five stores (among thousands of supermarket and bodega options in New York City) will lead to economic ruin. If the lessons from the other city-run stores that have been attempted are any indication of what is to come, Mamdani’s stores will likely carry lower-quality items and often run out of supply. Thus, there is reason to believe that these will not be a credible threat to the existing grocery markets in New York City. Second, with over 13,000 bodegas, the price competitiveness is already significant, meaning that additional competition may not impact the pricing as much as feared. Third, the city-run grocery stores will not carry many products important to bodegas, like hot prepared food, alcohol, and tobacco. Thus, these non-city-run grocery stores will have some competitive advantage via differentiated products.
Mamdani’s proposed city-owned grocery stores present a unique opportunity to test economic theories on competition and government intervention. While most conventional theories predict that these stores will not be as successful as hoped, this experiment has never been tried in a place like New York City, which has unique attributes. Whether this program helps New Yorkers or quietly squeezes out the small businesses that have anchored their neighborhoods for decades will depend on execution details that are still being written. It’s worth watching closely as the first stores open.