When you walk into a deli in Manhattan or downtown Brooklyn, you see prices such as $3.99 for a gallon of Cream-O-Land nonorganic milk and $7.50 for a pack of American Spirits. These are ridiculously high, but are they making the deli owner rich? It costs $2.79 for me to buy that gallon of milk, which means my profit margin is a rather modest 40 percent. Cigarettes are worse—I buy them from a Palestinian guy on Smith Street who sells them out of the back of his deli for $6.40. The government makes most of the money.
There’s no overriding rule for setting prices. Here in downtown Brooklyn, the profit margins are said to be determined by block: 70 percent on fully gentrified Court Street, 60 on trendy but coarse Smith, 50 when you get down to Hoyt, where the projects are. (We generally charge 50 or 60 percent above cost.) Of course, some companies, such as Hostess and Frito-Lay, all but preclude the possibility of a profit by printing the price right on the wrapper, a practice known as “bellmarking.” This is why in America, no matter where you are, a small bag of Doritos always costs 75 cents, Big Red costs 30 cents, and Wonder bread costs $1.89. My question is, if everything else in New York costs more—gas, rent, property taxes—shouldn’t Doritos?
I am not a typical New York deli owner: I grew up in Boston and work as an editor at a literary magazine. My wife, who’s originally from South Korea, works for a Japanese bank in midtown. At night, we slice cold cuts and punch lottery tickets. A deli can hardly survive without the free labor of family members. My mother-in-law, a brassy, bighearted woman named Kay, takes care of most of the day-to-day management of the store, and it shows. Today, for instance, she’s wearing a faded orange T-shirt that says COSTA RICA (a place she’s never been) with the sleeves torn off, revealing arms far beefier than those of most 57-year-old women. Kay has worked in delis for twenty years, doing the typical immigrant superhero routine of twelve-hour shifts and six-day workweeks. She’s been attacked by a fellow employee and robbed at gunpoint.
Our store is a traditional deli grocery, about a mile from the Brooklyn Bridge. Two years ago, we bought it from a Palestinian-American who had decided, shortly after 9/11, to get out of the deli business. We were newly married and had boxed up our lives and stationed ourselves—temporarily—in Kay’s basement on Staten Island. From there, we started saving for a down payment and made it a base for our house-hunting. Then in some fit of madness, we decided to spend the savings on a deli instead. Today we live, as many immigrants do, in the same small house packed with extended family.
“In summer, sales of bottled water, God’s gift to deli owners, go through the roof. Unlike virtually anything else we sell, bottledwater has a healthy proﬁt margin.”
There are things I love about the deli business. The close quarters force people to hang out and chat. I love looking at fully stocked shelves. I sleep well. I’ve learned that the trick is to count money just before you go to bed, even if it’s only a few hundred dollars. During the summer, sales of bottled water, God’s gift to deli owners, go through the roof. Unlike virtually anything else we sell, bottled water has a healthy profit margin—up to several hundred percent. Those $1 bottles of Poland Spring you buy? They cost us around 20 cents.
For all that I’ve learned to appreciate, however, a few weeks ago my wife and I agreed to put a for-sale ad in a Korean newspaper. Barely two years into this business, we are getting out.
The night shift begins at four in the afternoon, and on a weekday, this is usually a peaceful time. During the next nine hours, perhaps a few hundred customers will drift through our door. Over the long term, sales at a deli follow somewhat predictable patterns. People spend more in the middle of the month, between checks to the landlord. They stock up on groceries on Sunday night, and when the weather gets crappy, no matter what season it is, they gorge on ice cream. By contrast, the daily routine is volatile and deeply mysterious. Customers sometimes flood our store in groups of ten or fifteen. And then it’s empty for hours.
Another nice thing about the second shift is that health inspectors come by less often, so the cat, a phlegmatic tabby, can come out. (Cats, while practically universal in delis, are against code.) At night, the detectives trying to catch us selling cigarettes to minors tend to leave us alone as well. And the Drug Enforcement Agency hoping to catch us with bootleg cold medicine. And the Bureau of Alcohol, Tobacco, Firearms, and Explosives trying to catch us with “loosies,” cigarettes sold one at a time. It’s an endless list of operatives to watch for.
Under Bloomberg, delis have been fined for such absurd offenses as having too many letters on their awnings. True, inspections keep us honest, but as gossip in the Korean community suggests, the inevitable lapses and thunderous fines are driving large numbers of deli owners to abandon the profession. It’s certainly one of the reasons we are. Most deli owners are not rich, especially those who rent their business spaces. They stay open 24 hours, never taking a vacation, because they have to in order to generate a salary something in the neighborhood of what a schoolteacher makes. And what has happened to them in the past few years is that in addition to paying already enormous taxes to the city, state, and federal governments, they’ve had to absorb a kind of fourth tax—the inspector tax—which can come from any one of about seven agencies, but always does come, regardless of how clean or how careful you are.
The tyranny of the inspectors is all the more upsetting when you consider what the government fails to regulate. Consider ATMs. Like most delis, we have an ATM in our store that charges a fee of $1.75 per withdrawal. You would think that some accountability would be good, in case the machine eats your card or doesn’t give you the money. But our ATM has almost no identifying markings whatsoever. I don’t even know the full name of the guy who owns it. He’s just Mr. Kim, a Korean who owns a string of such machines all over Brooklyn. There’s no contract between us; he simply pays $800 to put his machine in our store. Occasionally he comes by to check on the machine and insert a fresh wad of cash.
Hitting the Expiration Date
An atypical deli owner faces the typical industry struggles—bellmarked Doritos, the DEA—and decides he wants out.Part II
Cornering the Corner Market
Grace Dancyger introduced branding to the Korean deli—and ended up with an East Village empire.Part III
Ten worth going out of your way for.
Generally speaking, the poorer a neighborhood is, the more its residents want sin products or the sugary, salty factory muck that gets sold at delis as snack food. At around six, the population of our neighborhood undergoes a radical change. During the day, downtown Brooklyn belongs to people who, when they come to the store, request loosies and “50-cent beer” (malt liquor), who buy “cakes” (Twinkies, Ho Hos, etc.), and who generally ensure that the New York Post is the first paper we run out of.
At night, tastes change as those who work in Manhattan come home. The deli turns from a snack shop into a grocery store. Items with ORGANIC on the label begin to come off the shelves, imported beer out of the refrigerator. Whole-grain bread, fresh vegetables, low-fat ice cream, the Times. This is when the store makes money (through higher profit margins and bigger individual sales). In spite of our tight quarters, we’ve tried to straddle the divide between providing for the cakes customers and the parvenus. Nevertheless, some products have had to go. After we stopped selling certain malt liquors (including Colt 45, which bellmarks 40-ounce bottles at 99 cents, leaving a profit of 11 cents), I thought there was going to be an uprising. Some of the longtime residents said it was the final straw: Brooklyn had become unlivable.
Still, by 8:30, the yuppies are at home and there’s a rush on the lottery machine before the state turns off the system. With cigarettes so expensive and smoking in rapid decline, the lottery has moved into second place, behind alcohol, as the most painful addiction to watch from the supply end. Lottery players barge into the store bug-eyed and twitchy, brandishing scraps of crumpled paper. Our store has a rule: Lottery players get served after other customers, because the lottery machine has an abominable profit margin—6 cents on the dollar—and moreover because lottery players never buy food. Some lottery customers don’t actually mind being forced to wait. They need time to find a number to play, and you can see their eyes scanning the walls, the sandwich board, the receipts piled next to the register. Of course, the state doesn’t just regulate the lottery; it is the lottery. And you can’t argue that by running the lottery it is keeping the Mafia out. Half the delis in Brooklyn have illegal numbers games; those that do barely keep it hidden, and if you know where to look, you can find the results in the sports sections of the tabloids each day.
Today, Kay And I are making a supply run. Her toughness will come in handy at Jetro Cash & Carry, the deli mother ship, this one on the fringes of Sunset Park, in a postindustrial wasteland of chop shops and skanky strip clubs. Kay visits about once a week and spends about a thousand dollars each time. Jetro is one of the deli world’s dirty secrets, a blemish on the image of corner stores as quaint little redoubts of independence. Owned by Metro AG, a German food-services behemoth, the company runs a worldwide chain of grocery warehouses that in New York completely dominate the sale of products to delis. It has six metropolitan-area warehouses. If Jetro went out of business tomorrow, deli shelves all over the city would be empty within a week.
The sign in the parking lot says NOT OPEN TO THE PUBLIC. Jetro guards its privacy rather jealously. Photography isn’t permitted inside the warehouses, and no sales figures are given out. Once you’ve been there, it’s a little hard to understand all the secretiveness. The interior looks like any old retail warehouse. Small, nimble cranes dart by with yellow sirens twirling. A man on a hi-lo descends from the rafters holding a crate of ramen noodles. Leaking air fresheners combine with the scent of a dropped jar of horseradish. We walk through canyons of dog food and crevasses of kitty litter, and end up next to a mountain of paper towels.
Kay is the only woman in sight. The work is grueling—just try slinging around cases of Chunky soup and 40-pound bags of sugar—as well as dangerous. Jetro does not have shopping carts, but rather heavy-duty hand trolleys called “U-boats” that weigh a ton and don’t exactly stop on a dime. Last month, a U-boat ran over Kay’s foot, and her toe turned purple as an eggplant. That afternoon, she went right to sleep and didn’t get up for work the next day. When my wife and I come home to find Kay face-down on the living-room couch, as we often do, the same words tend to escape our mouths: “Jetro day.”
But the main reason Jetro is unavoidable is that most delis have storage problems—they don’t have enough inventory space. The owners of Jetro know this, hence their motto: “Just think of Jetro as your stockroom.” Which would be okay if being your own deliveryman and Jetro’s prices weren’t so brutal. In most businesses, cutting out the middleman yields a significant cost reduction. At Jetro, a bottle of ketchup goes for $2.10, a bottle of Windex for $2.58, a box of Wheat Thins for $2.48, and a box of Oreos for $2.66. If I don’t mark them up by 60 percent, I can’t pay my rent, which explains why New Yorkers cannot buy more than one item at a deli without seeing most of a $10 bill disappear.
We leave Jetro a grand poorer than we came in. When you spend a thousand dollars on food, especially at putatively wholesale prices, the results shouldn’t fit in the trunk of a Honda sedan. But at Jetro they do, easily.
In the end, getting out of the deli business will be a relief. The essence of small business is risk—chronic, gnawing, implacable risk. Most of us think of shopkeepers as meek, but there’s another side as well: the individualist fiercely hung up on buying his own ticket, no matter what the personal cost, and willing to crash and burn as a result. Now, in what we assume to be our final months as owners, though we’re still not making any money, the sense of crisis has settled into something relaxed and easy—the deli idyll of those who have been inside the business only as customers.