It is capitalism. The capital necessary to purchase the store, maintain cash flow, and make periodic maintenance and upgrades will come from the ownership. Profit, an important part of capitalism, may be generated by the business to the benefit of the shareholders. In this case, that profit may be cash, discounts, additional goods or services, reinvestment into the business or whatever the town owners/shareholders or their designees decide.
More neighborhood co-op businesses should be formed!
Have you considered that capitalism and communism are economic systems that are in a sense Turing complete, i.e. they can describe the exact same arbitrary economic phenomena
And therefore what you have described is in fact communism but in a language that is subjectively more palatable ?
I have considered that co-op’s, public utilities and mutual aid societies are excellent solutions to problems such as the one presented small towns, like Erie. It is possible to utilize private capital, such as the store purchase, for public benefit (the residents of Erie) and the mechanism by which that is accomplished is secondary. The fact that the city council was involved was a matter of convenience. It could have been accomplished by any means of group cooperation. For example, only half of the town (500 people) could have been involved, rather than the whole town. Palatability is in the details.
More neighborhood co-op businesses should be formed!