Billionaire investor Mark Cuban turned to AI chatbot Grok on Monday to test the economics behind New York City Mayor Zohran Mamdani‘s proposal for city-owned grocery stores, asking whether the concept could break even after estimating store margins and operating costs.
Grocery Margins Leave Little Room For Discounts
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.
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.
It also estimated that a focused assortment of higher-margin products could fit inside a 2,000- to 5,000-square-foot store.
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.
Can a City-Owned Grocery Store Make Money?
The assessment extended beyond store economics to the track record of government-backed grocery stores in the U.S.
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’s subsidized Sun Fresh, and several Illinois-backed grocery stores, many of which either closed or shifted to private operators after sustained losses.
In conclusion, the chatbot said purely government-run grocery stores have historically struggled to remain financially viable without ongoing subsidies or private-sector management.
Proposal Draws Fresh Criticism From Tech Leaders
Cuban had shared a post by All-In Podcast host Jason Calacanis on X, who criticized Mamdani’s proposal, arguing that grocery stores already operate on 1% to 2% profit margins and questioned the need for governments to subsidize the business.
Tesla Inc. (NASDAQ:TSLA) and Space Exploration Technologies Corp. (NASDAQ:SPCX) CEO Elon Musk also weighed in, saying AI and robots would eventually provide free goods and services, while calling Mamdani “a thief and a liar.”
Meanwhile, Rep. Ro Khanna (D-Calif.) defended Mamdani’s proposal, saying critics were blaming city-owned grocery stores instead of higher food prices driven by the Iran conflict and President Donald Trump’s tax policies.
Mamdani has proposed city-owned grocery stores across New York City’s five boroughs, with the city planning to issue requests for proposals to identify operators.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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