Zohran Mamdani’s Uphill Battle on Public Grocery Stores

Zohran Mamdani took the city by storm with a handful of catchy policies in his improbable — and ultimately successful — bid to win the Democratic mayoral primary. Promising to freeze rent, offer fast and free bus service and open a network of city-run grocery stores, Mamdani deserves praise for elevating affordability as the centerpiece of his campaign.

Now that he’s won the primary and appears well-positioned to win in November, Mamdani’s campaign promises demand close scrutiny. After all, transitioning from lofty campaign promises to the nitty-gritty of governing has bedeviled far more experienced operators than Mamdani.

As an academic researcher whose scholarship focuses on internet and utility policy, Mamdani’s pledge to open a handful of city-run grocery stores immediately caught my eye.

Cities rarely, if ever, enter a line of business in direct competition with the private sector. But this is exactly what Mamdani's city-owned grocery stores would do. They would compete with small businesses like bodegas and fruit vendors; local chains like Gristedes; apps like Amazon; gig platforms like Instacart; delivery services like FreshDirect and major brands like Wegmans and Trader Joe’s. As others have observed, the grocery business in New York City is already competitive. Coupled with razor-thin margins, even a nonprofit city-owned grocery store would have little room to struggle. The slightest under-performance would be greatly magnified under these conditions and could doom an outlet, or the entire network, and would likely necessitate a face-saving bailout to stay afloat. This is how things have played out in the handful of other large cities that have experimented with municipally-owned groceries. Indeed, a city-backed grocery venture in Kansas City, Missouri, recently closed after years of struggle. The city, with a population one-seventeenth that of New York City, ended up investing $18 million in this failed foray. (The rural story of government investment in grocery stores is a bit more promising, but that’s likely because the economic conditions there are much different from those in cities, where there are many more grocery options.)

Alternatively, a city-run grocery could try to out-compete its private counterparts by subsidizing artificially low prices. This would likely be ruinous for competition and create significant financial strain for the City, requiring it to keep pumping money into the venture to keep prices at a predatory level, all while having to pay the myriad other costs — employee wages and benefits, marketing, etc. — associated with running a business.

In short, when a city chooses to enter a complicated economic market dominated by private companies, it is exceedingly difficult for the government-run venture to compete on a level playing field with entrenched rivals. It will either fail to measure up (because government is not as nimble as its competitors) or it will seek to tilt the playing field in its favor by siphoning taxpayer funds to prop up its business. These dynamics have been evident in one of the only other instances where cities have sought to compete with private providers in the name of affordability: broadband.

Municipal broadband remains rare because high-speed internet access is almost universally available, especially in large, densely populated cities like New York City. Nevertheless, a few hundred small cities have chosen to deploy their own internet infrastructure to deliver low-cost services to residents. In many cases, these projects struggle from the very start, encountering higher-than-expected construction costs and vigorous responses from incumbent providers, who aggressively seek to protect their customer base. In addition, because the broadband market is already mature, with lots of different options from different providers, it is difficult for new entrants to stand out from the crowd. As such, when presented with a new offering from a city, even if it is slightly faster or cheaper than a private offering, many people choose to stick with their current ISP.

Higher deployment costs and lower-than-expected revenues create significant financial friction, making it difficult for most city-owned internet systems to stay afloat without continuous subsidization. This dynamic has played out in many cities across the country and is evident in New York State. Many public broadband networks have benefited immensely from generous subsidies, giving them a theoretical head start to becoming self-sufficient. But even with these subsidies, public broadband projects in the state are struggling. One need only look to Erie County, which is facing significant obstacles as it tries to build a public fiber network despite benefiting from $34 million in grants to help it get started.

In New York City, local officials have long been seduced by the idea of launching a city-owned broadband network. At first, the City built one — just for public safety purposes. But that network, NYCWiN, encountered substantial financial and operational challenges. For example, the network cost far more to build and maintain than initially estimated, and it crashed at one point because its operators failed to upgrade the underlying software. It was eventually decommissioned. A partnership with T-Mobile replaced this doomed effort.

Undeterred, the de Blasio administration devised an even more ambitious idea: a citywide public fiber network. The price tag? At least $2 billion. Why would the city spend this much money to deliver something that was already available from multiple private providers? The rationale was affordability. But there was little evidence that the proposed network would drive down prices and connect more people, or that it would be able to sustain itself, especially in a competitive marketplace. Shortly after taking office, Mayor Eric Adams pulled the plug on de Blasio’s plan and shifted the city’s resources to providing subsidies to low-income households. This program, Big Apple Connect, has been successful, bringing well over 100,000 New Yorkers online.

Broadband and groceries are very different businesses, but the lessons to be learned from city-run initiatives in both sectors are valuable and timely as Mamdani’s proposals are being examined more closely. City-run broadband networks that struggle usually face two choices when trying to determine next steps: seek subsidies from a local government or exit the market. In an even larger and more competitive market like New York City, a government-led business will likely find it very hard, if not impossible, to stay afloat without significant additional government resources to prop it up. This raises the question of whether it is worth it for the City to gamble with precious taxpayer funds or whether it should just provide subsidies directly to residents to help them pay their bills. The latter might be even more attractive now given the significant pullback in federal resources by President Donald Trump.

The best ideas don’t always involve building something new. Sometimes, they involve making the most of what’s already there.

Instead of trying to rewire the economy, the next mayor should realize that many affordability issues can be effectively addressed via subsidies and partnerships with private providers. Oftentimes, the most effective way to help people isn’t by owning the store, it’s by helping them afford what’s already on the shelf.