Grocery Margins Leave Little Room For Discounts<\/p>\n
In a post on X, Cuban asked Grok which grocery products generate gross margins of 70% or more that could support a 30% discount, before questioning how much sales a store operating on 15% margins would need to break even.<\/p>\n
The chatbot responded, saying almost no grocery categories consistently generate gross margins of 70% or more, with even the highest-margin segments falling below that level.<\/p>\n
It also estimated that a focused assortment of higher-margin products could fit inside a 2,000- to 5,000-square-foot store.<\/p>\n
Excluding labor and employee benefits, it forecasted annual operating costs at roughly $25 to $55 per square foot, including rent, utilities, maintenance, and insurance, with costs potentially higher in New York City.<\/p>\n
Can a City-Owned Grocery Store Make Money?<\/p>\n
The assessment extended beyond store economics to the track record of government-backed grocery stores in the U.S.<\/p>\n
Grok in response to Cuban said city-owned grocery stores have rarely succeeded in the U.S., citing examples including Baldwin, Florida, Erie, Kansas, Kansas City\u2019s subsidized Sun Fresh, and several Illinois-backed grocery stores, many of which either closed or shifted to private operators after sustained losses.<\/p>\n
In conclusion, the chatbot said purely government-run grocery stores have historically struggled to remain financially viable without ongoing subsidies or private-sector management.<\/p>\n
Proposal Draws Fresh Criticism From Tech Leaders<\/p>\n
Cuban had shared a post by All-In Podcast host Jason Calacanis on X, who criticized Mamdani\u2019s proposal, arguing that grocery stores already operate on 1% to 2% profit margins and questioned the need for governments to subsidize the business.<\/p>\n