Opening a grocery store can be a very profitable business, such establishments are in demand all over the world, and Russia is no exception.
Such a store is quite easy to open, does not require as much capital as other options, and thanks to its good location, the presence of a large assortment of goods and the correct price structure, the break-even point is passed relatively quickly.
According to Rosstat, the share of grocery stores is 69% of total retail sales.
However, like other similar businesses, you will need to come up with a grocery store business plan first. Further in the article, we will look at the average cost of opening a grocery store from scratch, give some tips for aspiring entrepreneurs, and also provide a ready-made grocery store business plan.
Grocery Market Overview
When people are looking for specialty foods or ingredients that can’t be found in a regular store, bazaar, or nearby supermarket, they usually go to smaller grocery stores.
These outlets sell products and merchandise that are out of the ordinary and are not sold in mainstream stores or are exclusive items. Later in the article we will consider a similar version of the store, however, our business plan is also suitable for a regular grocery store.
Before you start creating a business plan, you need to conduct a market analysis. First of all, pay attention to:
- the total number of stores, their availability and pricing policy;
- the presence of free niches with a unique assortment (shops with organic products, vegan, halal and kosher products, shops near the house or with a national-ethnic ensemble);
- availability of food franchises + the opportunity to become a franchisee.
If the area where you are going to open a grocery store is suitable, you can proceed to the next step: creating a business plan.
Detailed grocery store business plan with a description of each item
An important part of your business plan should be deciding whether to start development from scratch or buy a franchise and start working as a franchisee.
A franchise gives you benefits by helping you with marketing, sourcing, logistics, and more. The franchisor also provides a ready-made grocery store business plan.
What franchise to start with? It all depends on your preferences, financial capabilities and region. For example, retail chains such as Magnit, Pyaterochka, Dixy and Magnolia are actively developing and providing favorable conditions for buying a franchise.
But this solution also has disadvantages. First of all, the franchisee is deprived of any opportunity to choose the assortment, the layout of the trading floor, as well as the choice of pricing policy.
Secondly, the franchisee must pay a monthly percentage of income or a predetermined amount (royalty – license fee).
And thirdly, if your grocery store is unprofitable or simply unprofitable for the franchise, the franchisor can simply close it. There is a way out of this situation – to completely redeem the store for the full cost, including rent, equipment and goods.
There is another way – to start your own business from scratch. This will not only allow you to manage it the way you want, but also gain experience for further development. In addition, all profits from sales will go to you personally.
Choosing the second option, you must prepare a business plan that will help you open a new establishment in an organized and phased manner, as well as make your future business more attractive to investors.
Briefly, the business plan should consist of the following points:
- store name and logo;
- commercial significance;
- market analysis;
- discovery of goals, direction in trading;
- unique features, target market (e.g. vegan or halal products);
- future provider;
- estimated opening cost;
- list of funding sources;
- estimated profit and break-even point.
Of course, each business plan is similar in structure, but differs in content, it depends not only on the experience of the person who writes it, but also on the initial approach.
To better understand what exactly should be included in these items, let’s break down the grocery store business plan on the shelves and consider each item separately.
Step 1. Name of the store
Your store name, like your logo, is a brand and should be taken seriously. Of course, when planning, no one bothers to change and revise the name, however, as soon as the grocery store opens, changing the brand becomes rude.
How to Create a Brand Name: 7 Ways to Generate
When creating a brand, you can seek help from designers or the appropriate studio. In this case, there is no need to immediately create a logo; for starters, you can wait until the store “unscrews”.
The logo itself, like the name, should reflect your direction, as well as the business niche you have chosen. For example, if you bid on the sale of traditional Russian products, then the name should reflect this choice.
Of course, if you decide to buy a franchise, then you don’t have to worry about the name and logo, as the store will use the trademark of the franchisor you choose.
Step 2. The relevance of opening a grocery store
Business relevance overlaps with the next topic, market valuation, but there are key differences. Relevance reflects the general trend of growth or decline of grocery stores in your area, their demand and competitiveness with large retail chains.
A ready-made grocery store business plan should include all of the above elements, as well as an approximate forecast for the development of this business at the regional and regional level.
Step 3. Market Assessment
This part of the business plan includes an assessment of local retail, the total number of grocery stores in your city, their concentration, the presence of potential competitors in your chosen niche, general trends in opening and closing stores, grocery stores.
If the selected store concept is unique, you must indicate whether it will be in demand in your city.
In Russia, the sale of food products via the Internet is becoming more and more popular, so it can be included in the business plan of a grocery store
Step 4. Opening goals and direction
The trade address speaks for itself, here you indicate what goods you will sell in the store, these can be highly specialized (semi-finished products, meat and dairy products, vegetables and fruits) or a variety of food and household goods.
Preferred clients are local residents. Because the grocery store business is competitive, small businesses thrive in local communities and small areas.
Many shoppers prefer to go to large stores and supermarkets such as Karusel, Magnit, Auchan or Perekrestok for food.
Therefore, the newly minted entrepreneur will need to prioritize the choice of products, as well as bet on a certain segment of the population, offering favorable prices.
Step 5. Features of the establishment
In particular, everything that is not included in the instructions is included: chosen niche (domestic products, vegan food), marketing methods (buying products online, individual packaging and delivery), own kitchen (selling cakes, desserts, salads, pizza) or organize the sale of exclusive, rare and unusual products that are not typical for your region.
Step 6. Selecting a supplier
Without building relationships with suppliers, your store will simply have nothing to sell, unless of course you are the owner of a small factory producing a variety of food products.
You will need wholesalers who supply products for sale, this list includes a variety of food and beverages, cigarettes, alcohol, household chemicals and household products, and (possibly) auto parts and agricultural products.
How to open an auto parts store?
You will need to decide whether to deal with a full-service wholesaler, which may require larger orders, or find limited-service wholesalers, who may incur additional costs.
Both have their pros and cons, so consider your needs and estimated sales volume before making a decision.
Another option, especially if you decide to open a very small store, is to buy goods yourself to sell in wholesale stores. This method is much more convoluted, but useful if you’re planning to maintain low sales volumes initially.
Step 7Choose a Location
Location selection is the main source of income for any grocery store. It is vital for your business to choose a location that is easy to get to and the grocery store sign is visible from the road.
There are much more visitors in stores of conventional schemes, in this case the presence of transport hubs is especially appreciated.
Of course, you should look for other stores nearby, especially if they are large supermarkets. There would be no point in opening a grocery store next to such giants.
In this case, it turns out that the ideal location is a roadside store, preferably in a compact area or city without large supermarkets nearby, or in the central or historical area of the city where large establishments are expected to open, commercial. It wasn’t planned.
A big plus would be a room / building with a glass facade. In this case, it will be possible to place shelves with promotional goods directly on the showcase, thus attracting potential buyers and selling promotional goods many times faster.
Step 8: Calculate the Cost of Opening a Grocery Store
A completed grocery store business plan should include an estimate of the approximate start-up costs. As a rule, it includes:
- rental cost (total cost up to the estimated recovery point);
- utility bills (also up to the moment of collection);
- purchase of working equipment;
- interior design, purchase of accessories;
- calculation of wages of workers;
- expenses for obtaining documents and registering an individual entrepreneur or LLC;
- buying products for sale;
- “auxiliary” fund in the amount of 30-50% of the total investment (but not the fact that it will be used).
Next, we will consider in detail the approximate cost of opening a small grocery store in a city with a population of 500,000 people.
Step 9. Financing the business
Finding people to finance is essential to your business. The most preferred sources are banks, as well as the creation of an LLC and the search for people who contribute capital.
Many Russian banks have convenient loan programs specially designed for the niche of small and medium-sized businesses. In some banks, the total loan amount reaches 10 million rubles. In addition, if you are going to organize a grocery store in the form of an LLC, all parties to the agreement can take such a loan.
You can invite anyone to share, if you have friends or relatives who are ready to start a joint business, feel free to invite them.
Another method might be to get federal grants to fund small businesses. The size of such grants varies depending on the initial amount of required investment and reaches 300 thousand rubles.
Step 10. Calculation of approximate profit
The approximate calculation of profit is purely an estimate, however, when drawing up a loan agreement, these numbers will also be useful, so this item can be included in your grocery store business plan.
Estimated profit may vary depending on the initial approach: sales volume, store area, ways of buying goods, etc. As a rule, these are just catch-up growth rates: 2-4% per month.
|You can attract customers with typical marketing techniques, but it will be much more difficult to retain them.Since your grocery store is initially targeted at a wide audience (unless it is an exclusive store), you need to add a few elements that will allow you to retain a certain number of daily visitors.For example, install a coffee machine or a grill for making sandwiches and hot dogs in a store. Fresh pastries and hot coffee were not a hindrance to any business.|
Step 11. Choosing a room
The requirements for a grocery store are as follows:
- the minimum area of the trading floor is 40 m2;
- staff quarters, toilet and pantry;
- the presence of a freezer or special pantries;
- convenient access for trucks;
- availability of fire extinguishing systems and general compliance with PPB and SES;
- connection to communications – electricity, water supply.
Of course, depending on the city, the cost of renting such a room will vary. For example, in a city with a population of 500 thousand people, renting 100 m2 will cost 50-80 thousand rubles per month.
Step 12. Opening cost
So how much does it cost to open a grocery store? We can say that the analysis of the costs associated with opening a supermarket business in Russia will be the same for most cities. The exception will be expenses for the purchase of products for sale, as well as for rent.
Another factor is the cost of transportation and installation of equipment, wages, and the general availability of goods in the region.
Calculate the total investment amount:
- the total cost of registering a company in the Russian Federation is 24,000 rubles;
- purchase of a software license, conclusion of contracts with suppliers – 30 thousand;
- rent for 12 months in advance – 600 thousand;
- repair of the premises, reconstruction of the store – 30 thousand rubles;
- purchase of racks and shelves – 100-160 thousand;
- utilities – 162 thousand;
- purchase of startup products – from 800 thousand;
- wages to employees (4 people) – up to 1.5 million annually;
- electrical equipment (refrigerators, cash registers, computers) – 200-260 thousand rubles;
- advertising (printing brochures, creating a website) – up to 100 thousand;
- (optional) hiring a professional marketer – up to 100 thousand;
- (optional) hiring a business consultant – up to 200 thousand rubles.
The estimated total minimum amount will be RUB 3.1 million, excluding professional services. In addition, you will need an additional 50% of the original amount for further food replenishment.
A completed grocery store business plan may include several other expenses, so the final amount may vary.
Step 13: Recruitment
In this business, you need reliable employees with experience in a retail store. For this reason, we advise against hiring inexperienced workers, as your product, your store, and your own money are at stake.
For a small store with a sales area of 50 m2, a staff of 3-4 employees is suitable: two sales assistants at the checkout, an administrator and a purchasing manager. Of course, if you have experience as an administrator or manager, you can independently perform the functions of one of the positions, thereby saving on employees.
Step 14 Advertise
From a marketing standpoint, a grocery store is pretty standard. Use mailing lists, flyers and signs. If your grocery store is in a busy area, these promotional strategies will have the most impact.
Most start-up entrepreneurs immediately hire an advertising agency, this method is the most optimal in terms of price / quality ratio.
Since a small grocery store is a local thing, the advertising itself must be purely local. As mentioned earlier in the article, a good location is already a great advertisement.
How to open a grocery store from scratch / Business idea.
Opening a grocery store – the result
Opening a grocery store, like any other retail business, comes with a number of risks. First of all – its rapid growth in Russia, respectively, the number of competitors constantly requires to be competitive.
How to open your store: a detailed plan + calculations
On the other hand, opening a grocery store is a promising long-term investment, and with quite flexible options: depending on the current market situation, you can quickly change one assortment to another, thus adjusting to general trends.
Such a business has great opportunities to create a “unique” store, customize it for the buyer and orient it, whether it is the sale of domestic products, rare products, meat or flour products, fresh vegetables and other products.
As can be seen from the article, even a ready-made grocery store business plan is flexible and functional, easily adapts to a changing economic and political situation, and the income of the store itself is provided for the daily income of a person of need.