A small town that saved its only grocery store by buying it | Hacker News Reader

A small town that saved its only grocery store by buying it

thehustle.co

133 pointswalterbell117 comments

In Denmark we have a long history of cooperative retail stores, so a development like this is not too surprising sering as there have been quite a few examples of stores getting bought by the community here as well. I think it is a good move in general since there is not going to be the same profit over everything mentality in those stores since it is owned by people who buys stuff there.

There are a lot of co-ops in the US too, but that’s not quite what this is. I’m this case the town government bought and runs the store. A co-op might be better, but you may need a certain population threshold to make that work.

For sufficiently representative government, I think that government-owned and cooperatively-owned are synonymous. Especially for small towns, the overhead of having two separate organizations, each of which represents all people in the town, would be quite large.

They definitely are not. A government owned enterprise is many steps removed from voters, and will be run by bureaucrats. This creates an internal constituency and an opportunity for several kinds of graft. A co-op involves your direct participation in operations, and probably an opportunity to be directly involved in decision making depending on the size of the co-op.

Maybe for a really small co-op, but beyond 100 to 200 folks, any co-op will have the exact same internal dynamics as city hall, just on a smaller scale.

Not really. A co-op can’t levy a tax on your home. A co-op can’t pass laws. A co-op doesn’t have a police force. Co-ops also have to comply with generally accepted accounting principles. Municipalities also have the backstop of the larger state if they become insolvent.

These are very different things.

Internal dynamics means the dynamics between the individuals within an organization.

I think the big difference is that government is mandatory, whereas belonging to a co-op is voluntary. Both are useful and important.

I shop at a couple of co-ops, and they're excellent.

Ideally I'd like to chat with a lawyer knowledgeable about co-op formation to create an open template for a version designed to leverage a long term lease from a nonprofit land trust. The structure could be mixed use to include housing; resident owned, appreciation moderated, with support from the trust for affordability.

I've seen a few organizations that might help in a generic way, but lawyers haven't been interested in the 'open' aspect.

I have relatives on an island with a permanent population of about ~200 that cooperatively own their store

I think a populating of the around 1000 of the city and the sorrunding area is maybe enough though it is likely harder to compete in these times where everyone has cars and such.

(THere is also recent examples here where it is not really a cooperative but a group of citizens getting together and raising money to buy the store and rent it out to a grocer. For example in Halvrimmen https://nordjyske.dk/nyheder/jammerbugt/borgere-koeber-koebm..., where they have made a LTD that owns the store)

What more is a government in a Democracy than a cooperatively owned monopoly on violence?

I find it strange that citizens of democratic countries agree that democracy in politics is necessary but democracy in economics is not...

By that I mean humans are born into this world with one vote for every election in politics but in economics people are born with zero votes and must rely on the benevolence of their parents.

There is no minimum access to pollution rights, natural resources, land and perhaps money granted to every citizen equally the moment they are born. It doesn't have to be an insane amount that people can live off, just enough to feel like you are not born as an illegal alien on this planet.

No, I don't mean welfare, I mean real democracy.

People vote each time they choose buy a good or a service. Isn't it democracy if you have the freedom to choose to whom you give your hard earned money (what is left after taxes)?

If you proposed that people could buy extra votes in elections, at say 100$ a pop, virtually everyone would call it an affront to democracy, as rightly so. Yet it is precisely what happened when it comes to governance of joint-stock companies.

> virtually everyone would call it an affront to democracy, as rightly so

Except that's how our government works too, the votes just aren't official and they're _far_ more effective.

No.

For one, a vote is a right. It costs you nothing to vote. A vote has a single purpose.

Buying an item is not the same. You have a fixed amount of money and there is an opportunity cost to buying anything. Moreover, you need to buy certain items to survive.

If you are poor you are not in a position where you have a choice, you have to buy the cheapest items that you need to survive. If you are rich you have more than enough resources to survive, to buy the items you actually want, and more beyond.

When you are forced to vote in a certain way because you cannot afford not to, that is not democracy.

It's an analogy. There's also an opportunity cost to a vote, insofar as casting a vote for A means you can not cast a vote for B. You also have a fixed amount of votes, 1.

> If you are poor you are not in a position where you have a choice, you have to buy the cheapest items that you need to survive

This is a really dull and tedious way of looking at things. Poor people make choices based on preference all of the time. Especially because food in the US is dirt cheap in historical terms. Sure you aren't buying organic grass fed meat, but you can pick from a wide range of cheap foods. Are your choices more limited, sure, but you still have choices.

Is it democracy if some people are born with an effectively infinite number of votes and others are born with zero? What a silly analogy.

It's just a shitty democracy. Funnily enough, especially since Citizens United (but even way before ofc), that's basically how our government works too.

People say this, but I think you probably aren't clear on what the Citizens United decision meant. It boiled down to overturning a law that prevented groups of people from spending more than a certain dollar value on anything that could be considered campaigning. The law was so broad that it was used against a Michael Moore documentary, and was obviously unconstitutional.

Also the idea that you can just reliably buy congresspeople by spending money on ads is a farce.

A cursory look at Wikipedia would tell you that Citizens United overturned a Supreme Court decision from 1990 called Austin v. Michigan.

In other words it did not boil down to "overturning a law" but created a new conservative doctrine that would apply to any law.

If it's not possible to buy politicians with campaign ads you shouldn't have a problem with a law making it illegal to buy politicans with campaign ads, no?

Yet for some reason you are spreading falsehoods about Citizens United, claiming a highly contested 5 to 4 decision turned on what was "obviously unconstitutional" (if it was obvious shouldn't it have been a unanimous decision?) almost like you want people to believe the case's ruling was sounder than it was and are afraid of it being overturned.

You're talking out of both sides of your mouth. "Buying politicans is my right as an American but also doesn't work so stay calm and don't panic over the fact I am buying politicians"

> I think you probably aren't clear on what the Citizens United decision meant

Should I take this as a prompt to assume random crap about you?

CU drastically increased spending by outside, untracked groups, on the ridiculous premise that money is not a corrupting influence in politics. It was the end of meaningful campaign finance regulations.

> Also the idea that you can just reliably buy congresspeople by spending money on ads is a farce.

Why are companies and groups spending so much then, including spending on both sides of many races?

I think you're mixing concepts... It's a free market economy if you can choose who to buy from; it's a democracy if the citizens choose the rules and laws, which may prohibit you from buying certain things.

This is even more important due to the fact that the amount of power in the political sphere keeps shrinking, while the power in the economic sphere keeps growing.

The amount of real power politicians truly have is laughable compared to the state of affairs even 50 or 60 years ago. If you think about it there is almost no decision of substance that can be made without deference to economic power (in the person of un-elected, in-accountable actors), i.e. the amount of power that political actors have is very small, compared to say pre-wwii times or the couple of decades afterwards. Historically this has never been the case, to this extent.

Most live in representative republics, not "real" democracies, or they'd spend all day every day reading bills and voting on them.

I don't think that's necessarily a widespread agreement. Even within the bounds of basic centrist liberalism, people believe that sufficiently concentrated wealth can rival the power of governments, and deserve to be limited in the way that governments are.

The state's monopoly, qua Max Weber, is on the claim to the legitimate use of violence. That is, the right and legitimacy of that right, is restricted to the state, or an entity acting in the effective capacity of a state, whatever it happens to call itself.

Absent this, one of three conditions exist;

1. There is no monopoly. In which case violence is widespread, and there is no state.

2. There is no legitimacy. In which case violence is capricious. This is your condition of tyranny (unaccountable power).

3. Some non-state power or agent assumes the monopoly on legitimate violence. In which case it becomes, by definition The State.

The state's claim is to legitimacy. A capricious exercise would be an abrogation of legitimacy

Weber, Max (1978). Roth, Guenther; Wittich, Claus (eds.). Economy and Society. Berkeley: U. California Press. p. 54.

<https://archive.org/details/economysociety00webe/page/54/mod...>

There's an excellent explanation of the common misunderstanding in this episode of the Talking Politics podcast: <https://play.acast.com/s/history-of-ideas/weberonleadership>

The misleading and abbreviated form that's frequently found online seems to have originated with Rothbard in the 1960s, and was further popularised by Nozick in the 1970s. It's now falsely accepted as a truth when in fact it is a gross misrepresentation and obscures the core principles Weber advanced.

No government has an absolute monopoly on violence. Here in the US, some thug could steal my bike and likely get away with it. Much of the literature using that definition includes coercion as a form of violence, and no government fully covers economic coercion.

If the number of entities in a society with discretion over violence is not equal to 1, what is the optimal number?

The literature normally refers to an "absolute monopoly on legitimate violence," since the state has no practical way to prevent all incidental acts of non-state violence.

Sure, that makes sense. I still wonder what an oligopoly on legitimate violence looks like. The closest thing I can think of is the sweatshop system, where each sweatshop has coercive power over its workers, legitimized by the idea that the worker chose to join a particular sweatshop.

Consider that term "violence". It means to violate. To cross the line into what's private and holy. Not just your body, but your right to speak, your right to property, all that stuff. Which is exactly what we're talking about here. The legal right to cross the line.

It's kinda like having write permission on a file.

Our coop here is notoriously expensive. Even obviously cheap stuff like bulk grains are crazy spendy. I don't know why.

Are healthy foods just that much more expensive?

Their clientele is lots of wealthy retired hippies. Maybe they're just exploiting that niche. I dunno.

The town's meeting notes are online here[1]. I think they're pretty interesting.

[1]: https://erieks.com/agendas-minutes/

From the 2022-07-25 minutes, they discussed that the store is losing money. They decided to transfer money from sewer & equipment funds to it. They also decided to lower prices.

https://erieks.com/wp-content/uploads/2022/08/JULY25MINUTES....

I'm wondering why the city council is making such decisions. Do they have experience running grocery stores? Perhaps they cannot hire a capable manager to set prices and make the store break-even? They should consult someone with experience on the matter. The previous owners would probably be willing to give advice.

From the 2022-06-27 minutes, the council approved a request to use the store's freezer for a city event. The store's manager said they needed council approval. I think the council is micro-managing the store without competence in retail management. The store manager doesn't have authority to run the store. This is probably the root cause of the store's financial troubles.

https://erieks.com/wp-content/uploads/2022/08/JUNE27MINUTES....

Here's a better question: Should the store be break-even?

If the store is "losing money" then the community's taxes are collectively paying some part of the community's food costs. That sounds like a good thing! You still have personal choice, and your money still means something, but the town is collectively paying for more equal access to food and other essential goods, in a very direct way.

Thanks for posting, always something to be learned from governance and financial transparency.

They also held on to their public library. It's a rough time to be a small town, but Erie is putting up a fight at least.

> The cost: $300k, plus the cost of inventory (~$100k) and a 0.5% cut to the store’s previous owners for the next 10 years — in total, less than ~$500k.

Who knows more about grocery retail, and can say: What makes buying an existing store like this preferable to just starting a new store, and avoiding the $300K and 0.5% cut for 10 years?

Think the same reason you buy any working business. The previous owner has managed to solve a great number of non-obvious operational problems. To name a few that come to mind:

* Established supply chain - Working agreements with suppliers (no need to find and negotiate suppliers) - Working logistics. Scheduling of supplies is sorted, you have reliable delivery slots with all supplies

* Employees. No need to find and train labour.

* Working pay roll, accounting, taxes. No need to create that infrastructure from scratch.

* Know good business model, with auditable accounts. You substantially de-risk the investment, because you have meaningful historical data to estimate future performance from.

* Physical infrastructure already setup. No need to find a building, buy equipment (shelves, tills etc) and setup equipment.

* Business generates revenue for new owner immediately after purchase. No time needed to solve all of the above problems, instead time can be used to grow or stabilise business.

Owning the only grocery store in town doesn't sound like a risky business model compared to the existing and apparently de-risked "only grocery store in town" business model you'd be paying for.

you'd still have to set up the grocery store instead of begin to make money immediately

I normally think of the existing customer base and "brand" as the main asset, which isn't much of an asset here. But I don't have experience managing retail business, and what you say makes sense, thanks!

It's already built, and the location is presumably decent. How much cash and time would it take to build a new one?

Likey it is the lack of retail space to build one.

Reminds me of both the DIY ISPs and to some extent the "It's Time to Build" essay. Seems that sometimes the Nike slogan is the key ingredient.

Ah, this is in Kansas. Three years ago, there was a similar story in Florida.

https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

The very small town I grew up in had to do this ten years ago. They formed a co-op and it bought the store. They split the co-op into 100 shares costing a thousand dollars each. I thought about buying one effectively as a donation, but didn’t.

This is a bit different than a coop. This is the city government owning the store.

If it's government run then it isn't profit-driven, right?

That means just one brand of canned corn. The best brand. No games with 20 brands of the same stuff competing for shelf position and such.

And products could be placed for ease of access. Vs maximizing your path through the store so you'll buy more.

And none of that wall-of-candybars right by the cash register shenanigans.

A store like that could serve the puplic with miraculous efficiency.

There are parallels between low income (inner city) and rural problems.

I genuinely feel modern discrimination and issues are better understood as class issues, though frequently it’s obfuscated as racial problems (etc.)

Class issues and racial issues intersect. If you skew too far toward class issues, you wind up in class reductionism (the demonstrably false notion that creating economic equality will solve racism). If you skew too far toward race issues, you get... I'm not sure what the term for it is, but it's essentially trying to achieve racial equality by building up a class of Black entrepreneurs and ignoring everyone else.

An interesting thing I've found (anecdotally) is that corporate and nonprofit efforts for "racial justice" skew very heavily toward the latter, but community aid and grassroots racial justice groups strike much more of a balance.

Not sure what you are getting at, but the problem with urban retailers is shoplifting. I doubt that is the problem at "Stub's".

Obfuscated probably isn't the right word: the reality is that there are both class and racial issues. The latter feeds into the former; the former gives political cover for the latter.

Wouldn't it be cheaper for the town to just subsidize it?

It's often very sensible to own something oneself, if you can organize it.

If someone else owns it, they're going to want to extract profit for themselves and it's a very different situation than just getting an employee. For example, compare renting with being part of something like a condominium association.

Building capital and controlling things oneself is the thing to do with almost everything.

Why would you expect a subsidy to be as efficient?

As someone who grew up in USSR I am generally a bit sceptical about collectively owned businesses. Not saying that it never works, but in general privately owned business is usually more efficient. Owning a business collectively opens it to politicking and bad decision making by committee.

On the other hand, if the business model is simple enough, co-owning it might make sense.

The problem I see with public ownership is the risk that the government will sell it and that one will thus be exposed to someone reaping monopoly rents, and this creates my preference for co-ownership.

However, I think Soviet problems are in part due to a near-total absence of market mechanisms and of game-theoretic thinking-- i.e. 'what is this state enterprise actually incentivized to do', so I don't think it's applicable to these kinds of things unless they get ossified.

Government ownership/operation is rarely a problem by itself. With the right management structures and incentives, they can be as productive and efficient as privately run businesses. In some examples, they can actually out-preform privately run businesses.

Around the world, there are many (partially) publicly owned logistics companies (airlines, cargo shipping lines) that are good examples of this working well. They can easily be profitable for the government owning them during the good times, they can actually run leaner with smaller rainy-day funds and be competitive with the private companies they are competing with. They can also operate in markets where private companies might choose to not operate, and can even drive more business to a country. Then when the bad times come around (for example, covid19 shutdowns), they can rely on government subsidies to get though the harsh times reasonably unscathed, while private companies might end up needing to do extreme cuts, or even go bankrupt.

With your example of the USSR, we are talking about an economy where every single business is collectively owned. And then to make things worse, the entire supply chain is collectively owned, and centrally planned. You can hire a good manager for the local store, but they aren't going to be able to change a thing when the government doesn't allocated them enough product to sell. You can't have two local stores compete with each other, they are both collectively owned and supplied by the same centrally managed supply chain.

It wasn't the collective ownership of the store that failed the USSR. It was the central planning of the whole economy.

With this example of a small small town grocery store, there is plenty still competition. There is the local Dollar General with it's shitty product selection. There is another government owned supermarket a in a town 9 miles away, operated by a different government. There are privately owned supermarkets in at least three larger town within 30 miles, and a town large enough for Walmart 45 miles away. There are probably also grocery delivery services (or at least amazon) covering the areas.

It will be forced to be competitive, and all the numbers are public for the residents to see.

> Not saying that it never works, but in general privately owned business is usually more efficient

The whole article is about how "market efficiency" has let down the small town. The town is simply too small to profitable enough for private businesses: as evidenced by no one chosing to buy the business for years.

I completely understand; I came from Mexico and it took me 20 years to stop seeing the government as always corrupt.

Private ownership opens it to all sorts of exploitation of workers or customers, plus if you subsidize it, you just move the politicking to the subsidy contract, and the bad decision making to the owner.

> Not saying that it never works, but in general privately owned business is usually more efficient.

Selection + survivor bias. The system only advertises successful private businesses. Not gigantic cooperatives that succeed in a global scale:

https://www.commondreams.org/views/2012/06/25/yes-there-alte...

Building capital and controlling things is good for individuals or families, but less so for large, uncoordinated organisations, especially governments. If I, an individual, own a shop, I'm incentivized to make it profitable- in this small town case, I'm incentivized to stock things people want to buy, to reduce waste, and so on. (Or to bail out and sell the premises if the economic conditions don't make sense anymore). Making the shop better makes me richer.

If I'm a wage-paid employee in a large shop (or any organization), then I'm looking to a) not get fired b) get a raise c) get a promotion. The bigger and more bureaucratic the organization, the more personnel decisions tend to become disconnected from ground truths and the more it becomes possible to rise through politics, whether or not the shop gets better. The people at the top, e.g. the owners of Walmart, want their shops to be more efficient, but if line worker #529 doesn't think he'll be paid more for making his local shop 5% more efficient, then he won't- and if there are more reliable ways up, he'll take those.

When a government owns/runs the shop, even the people at the top don't care about it making money- it's not their money to lose! The shop is probably useful as a political tool/division point, though. Imagine left-right debates about whether the government store should stock condoms, or meat, or whatever.

The problem with that plan is convincing someone to be interested enough to actually take the subsidy.

In this example, the old owners were retiring, and nobody wanted to buy it. There isn't a lot of revenue for a Grocery store in a town this small. So it was easier for the town to just buy it and then operate it.

Apparently the store was profitable before the sale, and the town operated store in the neighbouring town also operated at a 3% profit.

But looks like this town have made the choice to keep prices lower (probably to compete with the dollar general) and operate it at a slight loss, at least for the 2021 year, which is the only year they have released the annual report for since they bought it. Maybe the 2021 year included to startup costs and it would have otherwise been profitable.

How will they know the correct subsidy amount? Excess subsidy would go to the owners.

Run some kind of an auction.

Auction requires multiple people interested. Here there are none.

This is a good question. Patronizing the store should be sufficient to handle the economics, but I would guess the price of products is not their biggest concern or consideration.

If it was my town store, I would only want to make it a co-op and become part owner if there was an issue with management and/or cost control, e.g. bad owner, staffing, salaries, inventory, profit margin, upkeep, etc.

That depends on what you mean by "the town". In many cases the town may not be a legal entity, or it may be part of a larger county, that have zero interest in a rural grocery store. If you're thinking the inhabitants of the town then that might be somewhat unstable, as in people might be able to afford it one year, but not the next, people leaving, new people who are not interested.

We did something similar where I live. A new owner wanted to reopen the grocery store, and the town collected around $100.000 to get her started. A few people work for free a few hours a week, stocking shelfs and stuff like that. In the end though, it's a business and she needs to turn a profit. The people in the town are motivated to shop there, because if the store closes, the value of their homes will fall dramatically.

>We did something similar where I live. A new owner wanted to reopen the grocery store, and the town collected around $100.000 to get her started. A few people work for free a few hours a week, stocking shelfs and stuff like that. In the end though, it's a business and she needs to turn a profit. The people in the town are motivated to shop there, because if the store closes, the value of their homes will fall dramatically.

Sounds like you guys did the opposite: give a private owner a cheap loan and free volunteer labor. Hope she's at least opening up the books to you guys.

The former owners were retiring and no longer wanted to be involved. And nobody wanted to buy it.

One thing neglected in economic discussions is economy on a small scale. In a town of 1000 people, in the middle of both natural ravages of the pandemic and artificial economic drain imposed by state and national governments through health orders, invisible hand of the market is not going to be enough. It's going to take specific individuals invested in continued existence of the town above their own personal prosperity and ease of life to make that happen. In this situation, democratic control may well be the means to select the right individuals. Just so long as we don't confuse practicality of a tiny town with global solutions for food security or climate change or mRNA vaccines...

Nationalize all the things

The only downside seems that it’s now more difficult for another grocery store to open and be competitive. Then again, this downside doesn’t apply here, I guess that’s the point.

In such a place, there's only enough market for a single grocery store anyway.

But they did put the store on sale for a while with no buyers.

The town government would probably gladly sell the store to whoever wants to run it.

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