In terms of running a business, it doesn’t get much bigger than starting a supermarket. This is a very big undertaking and not one to be done lightly – before you begin you should consider the possibilities and opportunities that exist, along with your own ability to commit to starting a business that may take some time to become profitable. Returns on investment in supermarkets are generally around the three to five per cent mark, depending on a range of factors.
Many supermarkets fail in their first months or years due to the large sums of money that are required to establish and maintain such a large business, the vast logistical and organizational undertaking and the challenge to get enough customers. To ensure the best chances of success you must spend a great deal of time on the planning and researching phase and it’s best to have trusted and experienced advisors close to hand.
It all begins with a business plan
From the outset you need to develop a watertight business plan. This will be the best guide to how much time and money you will need to invest, where the right location for the most profitability is, how big you want the store and its premises to be, how many staff you need to hire, your expected sales volumes and profit margins, and many other aspects of the business and its running.
You also need to take a look at the competitors in the market and really analyse what they are doing, what their strengths are and also – most importantly – what the weakness are, or what can be improved upon.
This should be seen as your best insurance policy against failure and should be reviewed many times over. You should also set up mechanisms at this point to analyse performance and periodically review whether you are meeting target.
There are also important aspects of regulation that need to be taken into consideration, and you must pay attention to the requisite authorities, including the municipality and health department. Licenses must be applied for and payments made, and all of this will require time and money – to be factored into the business plan.
Getting ready to open up shop
Running supermarkets can be difficult to master as the variety of stock is so wide and you must have firm mechanisms in place in order to ensure stock doesn’t run low – customers finding empty shelves can be one of the quickest ways to drive them to another store.
Identifying the right type and amount of products to stock and when to arrange for new deliveries will be one of the crucial aspects to the smooth running of your supermarket. Also, thought must go into supermarket layout and marketing and branding. Typically a lot of thought goes into supermarket layout, both in terms of making the shopping experience easy and enjoyable for your customers, but also exposing them to the full range of offerings that you have – perhaps even those goods that they had not thought about before entering your shop. Promotions and breakout stands help draw attention to new stock or items that you might want to move quickly.
Finding the right suppliers for quality produce that you want to provide your customers will also be an important process that you should take time to get right. Quality fresh fruit and vegetables, meat, and other perishable items are essential to ensure compliance with bylaws and regulations, as well as to guarantee satisfied customers.
Quality fit out with easy-to-clean surfaces and shelves is also essential, as customers must have faith in the hygiene practices. Light, airy and well-lit spaces generate comfort and trust.
What’s that got to do with the price of fish?
Generating the right price for your goods is one crucial way of creating loyal customers; you should find the price margin that allows you to cover all your costs of wholesale goods, labour, rental and other service costs like electricity and water, and allows for enough profit to account for your own time and money investment.
However, supermarkets often take losses on certain items – a term known as loss leading – in order to attract customers in and generate brand loyalty or enthusiasm for a new product. The supermarket can then compensate for any losses through adjusting the price of other goods. This can be a very complicated and sophisticated science and must thought should go into which products you choose to lower or higher the margins on.
In general, about one fifth of supermarket sales comes in the form of butchery products, dairy and bakery goods account for about one tenth and fruit and vegetables account for another 10 per cent. Special care should be taken to make these prices attractive and reasonable for your customers.
An eye on the financial transactions
Good financial management is critical to ensuring enough cashflow to keep purchasing new produce and merchandise and ensuring the continued running of your supermarket. This means keeping an eagle eye on the financial turnover is vital; you must first of all have infallible payment monitoring system, including credit and cash options for customers – and perhaps even an internet shopping portal – staff you can trust who are trained in cash handling, good systems of storing and depositing paper money, enough cash to return to customers but not so much that will make your shop vulnerable to theft, and good accounting mechanisms.
How to create loyal customers
The secret to success of almost any business is generating a strong and loyal customer base. What most customers like in a supermarket is one that is fairly priced, well-stocked but also has other perks and reward schemes. Initiatives like coupons, vouchers, or free delivery services are all ways to attract and retain valued customers.