Grocery store! Grocery shopping! Grocery list! These are terms we are all familiar with, no matter how old or young we are. It then means, that groceries, symbolically are part of our everyday lives. No matter the state or country you live in, there is always that one item you want to pick up or you forgot to pick up from your favourite grocery store.
Someone once said and I believe it wholeheartedly, “Whoever said money can’t buy happiness simply didn’t know where to go shopping”. The question now is, does grocery shopping make you happy? If it does not, do you go grocery shopping in the right place? Or will you be happier, if you are the owner of the grocery shop?
In this practical guide, we will not be talking about the best places in the world, where you can do your grocery shopping, but rather, we will be looking at how you can start your own grocery business in 2021 and beyond. There are definitely no doubt, many giants in the retails business world, making a killing everyday with massive sales, but have you ever considered if there is a way for you to start a grocery business of your own and profit from it?
If you have ever thought of starting or intend to start one day, then happy days are here and your worry days are over now as you have come to the right page. In this write up, we will be dishing out a well-researched and well thought out practical guide on how you can start a grocery business, and profit from an activity that has always been and will remain a part of your life and that of your family for many years to come.
It does not matter if you want to start your grocery business in a store or online, we will be providing every detail you need to get started. So let us leave out all the formalities and hit the nail right on the head.
Starting your grocery business will require that you committedly and religiously follow the steps below:
- YOU NEED TO HAVE AN UNDERSTANDING OF THE INDUSTRY
According to research, grocery stores, which include supermarkets accounts for about 95% of food and beverages sales combined in America. This no doubt tells us that the food industry is a low-margin, high volume business, which if, you are rightly positioned and have what it takes to beat the competition, it will become a profitable business for you to start is you follow through with the information provided here.
You may not necessarily have to compete with the big players like Walmart or Costco, but an understanding of grocery business will reveal what new opportunities are opening up, such as is happening right now in areas like prepared foods, gourmet foods, which are now alternatives to restaurants, and are increasingly becoming new avenues for anyone to start their own grocery business.
- CONDUCT MARKET RESEARCH
If you want to start or make your business successful, it is required that you conduct a market research of the demographics and psychographics of the to be customers of your grocery business, so as to know those who will patronise your store, so as to ascertain if they are either rich, middle class or poor. This will give you vital data to enable you decide on what your offerings will be.
- DECIDE ON A NICHE
The purpose of your market research is to help you identify your niche. Knowing the niche you will serve based on the data from the demographics will help you look at the available niches and help you decide the particular one your audience falls into.
The popular niche for a grocery business are as follows:
* Ethnic foods and ingredients grocery store
* Locally-sourced grocery stores
* Gluten-free, organic or vegan items grocery stores
* Frozen foods
* Bulk-food chains
* Small-batch supermarkets,
* Children’s grocery shops
* Millennial-centric grocery stores.
It may not be a wise decision to get started in all the niches at once, but choosing one niche based on the findings from your demographics will show you the area you will have the greatest advantage, as you will not want to become “one of those stores”.
But bear in mind that there will always going to be competition, it is then expected that you focus on where you are the strongest. One way you can show your strength is by doing a better job by providing high quality customer service and satisfaction, and if you do it effectively and efficiently, you will always beat the competition from your little corner.
- KNOW THE MAJOR COMPETITORS IN THE INDUSTRY
Having a knowledge of the major players in the grocery business sector, is not to scare you away from starting the business, but rather, the knowledge can help leverage on them, as you will probably be buying your stocks from some of them, if you do not have direct access to manufacturers yet, to buy the goods with which to stock your store.
Here is a list of the major players in grocery business in America for instance.
* The Fresh Grocer (Pennsylvania, Delaware)
* Thriftway Supermarkets (Delaware, New Jersey, Pennsylvania, Kansas, Missouri)
* Times Supermarkets (Hawaii)
* Trade Fair (Queens County, New York City)
* Treasure Island (Chicago and Wilmette, Illinois)
* Trig’s (Wisconsin)
* Turco’s (New York)
The reason for knowing the big players is to enable you conduct a market analysis, which basically means, conducting a market survey to gather information about potential locations and communities where you can set up your grocery business.
Part of the key findings of your market survey will reveal that your store will be patronised by customers who do not want to travel outside the community or those customers who are always in a hurry, and not patient enough to go through the hassles of shopping in a very big shop. The advantage you will have with these type of customers, is that they are always willing to pay more than they would normally pay at the big shops, and if you have a relatively large no of such customers, then you will be in business, not minding if there are big players located few miles away from you.
A market survey will help to determine a sales forecast. There are five basic steps:
- Identify the trading area for the store and determine which items the store will carry.
- Determine the potential spending characteristics for the population within the area.
- Estimate the target area’s spending power within the trading area.
- Determine the proportion of the total sales volume (market share) that can reasonably be obtained.
- Estimate the total of sales volume you can reasonably attract.
- WRITE A BUSINESS PLAN
Writing a business plan is not just needed for securing funding for your grocery business, it also serves as a road map and guide for any business, as you would not want to start your grocery business without knowing the direction you are headed. How detailed your business plan is, will determine how excellently you will be able to communicate with bankers, partners, suppliers, and other business people.
Business plans in most cases varies with the type of business for which the plan is prepared, and this variation sometimes is dependent if the business is seeking for funding or not.
But generally speaking, almost all business plans have the following elements:
- Cover or Title Page
- Plan Summary
- Operating or Management Plan
- Market Analysis
- Marketing Plan
- Human Resource Management
- Financial Data
- Owner(s)’ Experience and Expertise
- SOURCE FOR FUNDING
After coming up with your business plan and you have also come up with the financial projection for your grocery business, the next step is to source for the capital, with which to establish. There are many ways you can raise funds to start your grocery business, but we will be looking at only the followings:
- Your own resources
You are the first investor in your business, and your initial investment may not necessarily be a pile of cash. So do a thorough inventory of your assets. You may have more assets than you may immediately realize. This could include savings accounts, equity in real estate, retirement accounts, vehicles, recreation equipment, collections and other investments. If you have any of such, you may decide to sell some assets for cash or use them as collateral for a loan.
- Friends and family
Friends and family are always there for us, so it will be a good thing if you have friends and family members, whom you might want to ask to invest in your grocery business. It is very important that you thread cautiously, while asking, as you would not want to lose your friends and family because of a bad business loan if something go wrong. The rule of thumb is to ask them professionally and document everything about the loan, so you don’t lose trust. Never ask a friend or family member to invest or loan you money they can’t afford to lose.
- Investors or bank loan
With your business plan you will be able to approach investors who may want to partner with you and invest in your business or you can alternatively approach your local bank or lending organisations and apply for a loan. Please note that there are pre-qualification requirements like your credit history and other indices, which the banks consider, before approving your loan applications.
You however, have to study all the loan offers and interest rates before applying for it. You may also consider applying for a business credit card or any other offers available to businesses in your niche.
- Government programs
There are lots of government support programs for small businesses. Simply do a quick search to see what is available in your state or country. For instance in America, you can check out the Small Business Administration, and see if you qualify for any of their programs
As a guide, we came up with estimated cost areas for your grocery business, to give you an idea of what it will take to get up and running with your grocery business. Some will be one-time costs while others may be monthly or on contract basis.
- Initial Inventory
- Leasehold Improvements
- Grand Opening/Advertising
- Utilities/Phone Deposits
- Owner/Operator Salary
- BUY A FRANCHISE OR START FROM SCRATCH
From choosing a niche, to doing a market research and survey, to knowing the cost of set up, it is now time for you to decide on the type of grocery business model you will want to adopt, and this will be if you are either to buy a franchise or you will be starting your own from the scratch.
Each option has its own cost implications, but depending on how large or small you want your business to be and the resources available to you, will determine the option that will best suit you. If you decide to go with the option of buying a franchise, you will have the established starter’s advantage in terms of marketing, advertising and set up tasks.
Another big advantage you may have if you decide to get a franchise, is that the franchise documents will help you to secure funding for your new grocery business.
If you do not want to go on the route of buying a franchise, but you would rather want to start your own from the scratch, one of the easiest alternatives is for you to buy an existing store and have ownership transferred to you, if this option is not available, you will have to rent your own store, stock it and follow through with all the other processes involved, which may be daunting and time consuming.
- KNOW THE POSSIBLE THREATS AND CHALLENGES
Every business has its own peculiar challenges and issues, including your grocery business, but knowing about the challenges before starting and anticipating or proffering a solution to them when they arise, will determine how fast you can find success and profit in your business. Some of the likely challenges you will encounter in starting your grocery business are listed below:
- Inefficient control over costs and quality of product
- Bad stock control
- Under- pricing of goods sold
- Bad customer relations
- Failure to promote and maintain a favourable public image
- Bad relations with suppliers
- Inability of management to reach decisions and act on them
- Failure to keep pace with management system
- Illness of key personnel
- Reluctance to seek professional assistance
- Failure to minimise taxation through tax planning
- Inadequate insurance
- Loss of sales momentum
- Bad personnel relations
- Loss of key personnel
The reason we highlighted the above likely or expected challenges is so you can prepare for them or have a solution in place before the issues start to arise.
- REGISTER YOUR BUSINESS
Your grocery business should be seen as a professional business, hence there is the need for you to get it registered. But beyond registering, the structure of the business you decide on is very important, as you have the available options of registering as a sole proprietor, limited liability partnership or a limited liability company.
Please seek the advice of a lawyer to help you decide on the best structure that will be best suited for your business. We will however recommend that you register a limited liability company, as this will prevent personal financial loss, if your business runs into some problems in the future.
After registering your business, you should also apply for Employer Identification Number (EIN).
These are some of the basic legal document that you are expected to have in place if you want to start a grocery store business in the United States of America;
- Certificate of Incorporation
- Business License
- Grocery Store Business Plan
- Non – disclosure Agreement
- Memorandum of Understanding (MoU)
- Employment Agreement (offer letters)
- Operating Agreement
- Company By laws
- Operating Agreement for LLCs
- Insurance Policy
- GET ALL REQUIRED PERMITS/INSURANCE
Every state and country have their own different operational rules and guidelines for businesses. It is very important that you find out if there are any permits that your grocery business will need. Chances are there are likely permits, depending on your niche, as the food niche for instance, is highly regulated, so there is a possibility that you will need to get a permit to operate in certain areas.
Aside the permits, getting insurance for your business is very mandatory. For instance, general workers’ compensation, product insurance or home-based business insurance to protect business assets in the event of a lawsuit or settlement, are mandatory for your business, if you don’t want to run into trouble waters in the future.
You may also need to purchase a surety bond. A surety bond helps promote an honest relationship between business owner and customer. In the event of a lawsuit or settlement, the state may use the bond to pay for legal expenses.
Here are types of insurance coverage commonly considered by small grocery stores:
- Fire and general property insurance—covering fire losses, vandalism, hail, and wind damage
- Plate-glass insurance—covering window damage
- Consequential— insurance covering loss of earnings or extra expenses when business is suspended due to fire or other catastrophe
- Burglary insurance—covering forced entry and theft of merchandise and cash
- Fidelity bonding—covering theft by an employee
- Fraud insurance—covering counterfeit money, bad checks, and larceny
- Public-liability insurance—covering injury to the public such as customer or pedestrian falling on the property
- Product-liability insurance—covering injury to customers arising from the use of goods purchased through the business
- Worker’s compensation insurance—covering injury to employees at work
- Life insurance—covering the life of the owner(s) or key employee(s)
- Business-interruption insurance
- Malpractice insurance—covering owner against claims from customers who suffer damages as a result of services performed
- Errors and omissions insurance—covering the store against claims from customers who suffer injury or loss because of errors made, or things that should have been done but failed to be done.
- SECURE YOUR INTELLECTUAL PROPERTIES/TRADEMARKS
If you choose the option of starting your business from the scratch, it may be necessary to secure your intellectual property rights by trademarking your company name, logos for instance, or filling for patents or copyrights for certain products that you created.
If you want to file for intellectual property protection and also register your trademark in the United States, you are to file an application with the USPTO. The final approval of your trademark is subject to the review of attorneys as required by USPTO.
- HIRE EMPLOYEES/BUY EQUIPMENT
Your grocery business will need staff and manpower to carry out its operations. Now is the time to hire staff like checkout workers, store clerks, stock clerks, supervisors, IT Personnel, etc. The number of staff you will need will depend if you are running a large or small shop, or you are simply selling on the internet.
You can reduce the number of staff from the start by adopting technology to handle some aspects of the task for you. You can use technology for instance, in the area of inventory management, scanners and checkout equipment, etc.
Opening and running a grocery store requires that you purchase some equipment. Some necessary items or equipment will include freezers for perishables, slicers to cut deli meats and cheese, and display cases to showcase pastries and breads.
- WRITE A MARKETING PLAN
Your grocery business is not going to sell itself, hence you need to market your new business. It is very obvious that the role of advertising/marketing for instance, which you will adopt for your business, is to provide a direct line of communication regarding your store’s products or services to customers or potential customers.
Your marketing efforts will help you achieve the followings:
- Convince customers that the selection of products in your store are the best
- Announce new products and services,
- Create a desire for your store’s products or services,
- Promote a positive image, and
- Draw customers into the store.
You can use any of the followings as your marketing channel or medium
- Direct mail
- Personal selling/word of mouth
- Social media
- Google ads
- Website/Blog posts/SEO
The success of your grocery business is beyond simply opening the store, there are key success indicators, which must be applied to help you succeed. Some of the success indicators are:
- Maintain good and quality products
- Offer discounts
- Create a Suppliers/Distributors Network
- Be creative
- Be good with numbers
- Be a good planner and organiser
- Be up to date with trends
We have been able to through this guide provided the practical steps you will need to start and profit from a grocery business. But what you will do with this information is totally dependent on you. So are you willing to step down from your high horse and do the needful? Are you ready to take that all important step? Action is cure, so do it now.
What are your thoughts with regards to this guide and do you do have any business idea you want us to write about? Let us know in the comment section.