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NYC, too, has many independent bakeries, fish, butchers, and fruit and vegetable shops, but as Lizzie notes, these are not priced for the budget conscious. Having talked to the owners and read about the business models, the reality is these shops - at least in NYC - have to become "higher-end" shops offering, in theory, a better product than the supermarkets so that they can differentiate themselves and charge more. They absolutely can't sell the same products at the same or lower prices as the supermarkets have better buying power and better economies of scale so they will always beat the small stores on price.
So, in NYC, we have a model of supermarkets (the regular ones, not the Whole Food type of ones) that offer the most-competitive prices on food and small, independent shops offering higher-end versions of those items and some speciality items for those willing to pay more. We do all our regular shopping at a a couple of supermarkets that are very competitive (and you can see it in their specials, etc., they are competing for your dollar) and, then, buy a few things now and then at the speciality shops the offer some unique and interesting items to treat ourselves.
So, in NYC, we have a model of supermarkets (the regular ones, not the Whole Food type of ones) that offer the most-competitive prices on food and small, independent shops offering higher-end versions of those items and some speciality items for those willing to pay more. We do all our regular shopping at a a couple of supermarkets that are very competitive (and you can see it in their specials, etc., they are competing for your dollar) and, then, buy a few things now and then at the speciality shops the offer some unique and interesting items to treat ourselves.