ERIE, Kan.—As Chicago studies whether to become the first big city to open a municipally-owned grocery store, it will be looking to places like this city of 1,000 people for tips on how to do it.

At the moment, things aren’t going especially well. Erie Market, which the city took over in 2021, is losing money almost every month amid stiff competition from a Walmart 15 miles away and a Dollar General across the street. The store has slashed prices, cleared the shelves of expired items and put in a salad bar to try to bring more people through the door.