Grocery store business plan: How to start a grocery store?

How to start a grocery store?

India’s retail industry has become one of the fastest-growing industries in the past few decades. Even though the country’s organized retail sector is only 10% of the total industry, its growth is estimated to reach $2 trillion by 2032. This growth has been mainly influenced by the increase in consumer purchases in organized retail businesses like grocery stores, supermarkets, hypermarkets, convenience stores, and more. The change in consumers’ preferences towards health, convenience, and value has mainly driven the growth of these businesses.

A few years ago, the majority of Indian consumers procured most of their monthly needs in local open-air markets called “mandi.” Recently, consumers started purchasing their monthly, weekly, or daily requirements in the local grocery stores. These grocery stores provide more convenience to consumers than local mandis, like quick billing, home deliveries, different payment modes, and more.

There are currently more than 12 million grocery retail outlets in India, making it a highly competitive market. Opening a grocery store in this environment may look difficult, but there is space for new startups. This blog, focusing on a comprehensive grocery store business plan, can help you understand how grocery stores differ from other businesses and guide you on how to start a grocery store to fit the available space and run it successfully. 

What is a grocery store?

A grocery store is a neighborhood store that sells mostly groceries and household items. Grocery stores are smaller retail spaces in which customers mainly shop for daily essentials. These stores are mostly run as family businesses and have been maintained for generations in some countries. These stores’ appearance and functionality vary based on different factors like target audience, locality, competition, and much more. Sometimes, these grocery stores will have the potential to become larger retail spaces called supermarkets.

Even though grocery stores are completely different from other retail businesses, supermarkets are the only businesses that have some resemblance to a grocery store. There are five major differences between these businesses that you should understand to get a complete idea of the grocery store business. When considering how to start a grocery store, it's crucial to develop a comprehensive grocery store business plan to navigate the unique challenges and opportunities presented by the Indian market.

Major differences between a grocery store and a supermarket

Size

Grocery stores are smaller compared to supermarkets, and they are easier to maintain.

Focus

A grocery store focuses on selling groceries and household items, but a supermarket focuses on groceries, household items, utensils, electronics, frozen foods, and much more.

Staffing

Grocery stores are mostly family-run businesses, but supermarkets require multiple staff members with broader knowledge to guide customers.

Counter tills

Grocery stores may have a maximum of two counters, but supermarkets have multiple counters to manage customer footfall.

How to start a grocery store

To create a grocery store business model, there are 10 multifaceted steps to follow.

How to start a grocery store business?

Business plan

To prepare a proper business plan for your grocery store, you need to consider some factors.

Store type: Is it an ordinary brick-and-mortar store, or is it going to be a hybrid store with both offline and online sales? The answer to this question will help you initiate the grocery shop business plan.

Target audience: Who is your target audience? Are they from urban or rural areas? Are they working professionals or larger families? This will help you define the goals of your business.

Competitor analysis: Who are your direct and indirect competitors? What strategies do they follow? How can you make your store unique? With these answers, you can define a strategy for your business.

Value proposition: A proper value proposition will help you stand out from others. Define your value proposition in the grocery business plan. For example, if you add value to your customers by offering free home delivery beyond a certain order value.

Operational plan: This relates to your business’s opening and closing times and the personnel required to run the store effectively. It should also have specific information about how you want the business to run on a daily basis.

Financial plan: Create a plan for generating revenue from the business including the capital required for starting the business.

By considering all these factors, you can create a complete grocery store business plan.

Store location

If you want to reach the right audience for your business, you need to be in the right location. Grocery stores are usually located in residential areas of a city or town, so customers can easily reach them for quick shopping trips for essentials.

An optimum location would be near department stores, restaurants, and banks that people would frequently visit. Choosing the right location for a grocery store is a far-reaching process, so you should start searching for the location in the earlier stages of planning your grocery business. A well-thought-out grocery shop business plan, especially one tailored for the Indian market, will guide you in making informed decisions about the ideal location for your grocery shop to ensure its success.

Legal compliance and registration

You need a proper license and permits to run your grocery store. Obtaining proper license and permit documents will help you give your customers a sense of confidence in your business. You need to comply with legal and regulatory requirements, like consumer protection, food safety, and business operations. For example, to start a grocery business in India you need to obtain these documents:

  • Registration as a sole proprietorship, partnership, private limited company, one-person company, or limited liability company (LLC) based on its nature.
  • Contract of lease (if one is leasing or renting the retail space).
  • A trade license from the municipality. (Note: it needs to be renewed every year between January 1 and March 31.)
  • Registration under the Shop and Establishment Act of 1953.
  • An FSSAI license to sell food products. (Note: It needs to be renewed every five years.)
  • TAN, GST, and other tax-related registrations.
  • Permits for advertisements from the municipality.
  • Commercial vehicle registration (if you are planning to use motor vehicles for your business for things like home deliveries).

Ensuring that you have these crucial documents in place is an essential step in the grocery store business plan, demonstrating your commitment to legal compliance and building a trustworthy business in the competitive grocery retail market.

Renting or owning the space

Renting or owning a space mainly depends on the budget of your business. As the first step, identify your square footage requirement and set your budget. Once the grocery store business plan and budget are fixed, decide whether you want to lease or own the retail space.

Leasing or owning a retail space has its own pros and cons in how to start a grocery store. Leasing a retail space will leave you with less responsibility over the property and a smaller commitment both in terms of time and money, but at the same time, you will have less control over the space. On the other hand, buying a retail space can give you full control over the space, but at the same time, it requires a big investment upfront. Once decided, look for potential properties online or with the help of a broker in your selected location.

Evaluate the space by considering factors like the size, visibility to consumers, alteration requirements, existing amenities, and parking facilities. Based on your grocery shop business plan, you can finalize the retail space and work on your leasing agreement (if you plan to rent the space). Use your negotiating prowess to draft a favorable lease agreement with low rent and a long lease period. Before signing anything, check it thoroughly with the help of an attorney.

Proper equipment

Even with a proper grocery shop business plan, you can’t run a grocery store without procuring the necessary equipment. Some of the necessary equipment includes:

  • Shelves
  • Shopping baskets
  • Packaging
  • Display cases
  • Signage
  • Cash drawers
  • Weighing scales
  • Barcode scanners
  • Printers and labeling machines
  • Lighting and ventilation machines
  • Stools
  • Ladders
  • Refrigeration units
  • Cleaning supplies
  • Freezer units

Select the right billing software that can be easily integrated with your barcode scanners to generate barcodes for selling your repacked or own-branded items in the store. Safety is a top priority, so apart from this basic equipment, you should also consider investing in security cameras, fire extinguishers, and smoke detectors to ensure the safety of both you and your customers.

How to start a grocery store business?

Build relationships

As a grocery store owner, developing a successful grocery shop business plan involves collaborating with multiple stakeholders, such as suppliers, wholesalers, and sometimes manufacturers, and building robust relationships with them. A strong relationship necessitates transparency, on-time payments, frequent communication, flexible payment terms, and mutual respect. These practices lead to increased productivity, on-time deliveries, a longer credit period, improved efficiency, improved product quality, and make your business more resilient. In the context of a grocery store business plan in India, choosing the right supply chain management system can further strengthen these relationships through data-driven reordering systems.

Stock and shelving

Once your grocery shop business plan is in motion and your retail space has the necessary equipment, you can stock your shelves with the right inventory. You know your audience, so fill your inventory with items that fulfill their needs. For example, if your target audience likes organic foods, fill your shelves with organic fruits and vegetables.

Maintaining your inventory in real-time is an exhausting task and invites a lot of human errors. Choose the right ERP software with a proper inventory management system that can help you perform quick stock audits in real-time and avoid human errors. Once you stock your inventory, arrange the products with efficient shelf management.  Proper shelf management can be achieved by following some basic strategies in alignment with your comprehensive grocery business plan.

Product placement: It is a crucial aspect of any grocery store business plan. If you want to increase sales of a particular item or brand? Place them at the average customer’s eye level to increase the probability of buyers choosing them over other products. With the right product placement, you can also create an opportunity to cross-sell items. For example, placing a biryani rice package next to a biryani masala mix can influence sales.

Category management: Placing products from particular categories in the same place and segmenting them based on colors, brands, price, and type will make it easier for the customer to identify and choose products from the category. For example, placing all the personal care products in one place and segmenting them based on price and premium.

Implementing these strategies as part of your comprehensive grocery store business plan allows you to utilize your shelf space effectively, resulting in benefits like increased sales, better customer satisfaction, and improved workforce efficiency.

Pricing

You can provide competitive pricing for your grocery store by analyzing the pricing strategies followed by your neighborhood stores. It also depends on the sales of your groceries and your bargaining prowess with wholesalers and manufacturers. Some pricing strategies can attract more customers. For example, you can mark up the price of seasonal products marginally and sell them with offers and discounts at a profit, a tactic to consider when implementing your grocery store business plan in India. This strategy will attract more customers to your store and drive more sales. With the help of loyalty management systems, you can create seasonal offers like these and larger loyalty programs to retain your customers.

For premium products, you can use a psychological pricing strategy to create a perception of a low price. For example, pricing a product at 199 rupees instead of 200 can boost the sale of the product. Pricing your product is not a one-time decision; it is a continuous process as outlined in your comprehensive grocery business plan. Changing market conditions and your target audience’s preferences influence your pricing decisions. Always be aware of changing market conditions and identify opportunities for growth.

Staffing

Even though grocery store businesses are mostly family-run businesses, you may require one or two staff members for assistance. However, these staff members need to have adequate sales knowledge, good communication skills, and the ability to learn technology. Hire experienced staff who need little training. You can’t train staff and run a store at the same time. In these situations, choosing an easy to use billing and inventory management system will make sure your staff can handle all the operations without your presence and with minimal training.

You should also look for a cultural fit because customers can easily interact with people they can relate to. Your best option would be to hire someone from the same region. More so, if you are running a grocery store in a metropolitan city, you can expect customers from multiple linguistic groups. Hire staff that can speak the regional language and also understand English to guide your customers without you. Making the right choices in hiring staff, as per your business plan for a grocery store, will help you save time and money, which can be reinvested in your business.

Promote your brand

Once everything is ready, you should start penetrating the market. You should begin by capturing a place in your target audience’s mind. Decide on your brand name and logo before planning your advertisements. Start with word-of-mouth advertising with the help of your friends and share flyers in your neighborhood apartment communities, schools, and housing units to promote your store.

Leverage the power of the internet and use different mediums to market your brand. As a first step, add your store to Google My Business for customers to locate your store easily. Create a social media page and website to promote your brand and advertise your offers, promotions, and discounts through these mediums. Ask the in-store customers to visit the website and social media pages and make them enroll so you can send them marketing campaigns later. You can also create referral programs to use existing customers to acquire new ones.

By following this 10-step process, you can start a grocery store business in India. However, when it comes to running the store, you need proper assistance from the right software to manage your business successfully.

Best software to manage your business successfully

You need a proper ERP system as a fundamental component of your grocery store business plan to manage your billing, accounting, inventory, supply chain, marketing, customer management, and other operations. An ERP software should help you track your inventory in real time, set multiple pricing for different customers and channels, maintain large supplier data, track supplier performance, facilitate omnichannel selling, offer 24/7 customer support, and be easily managed by your whole staff despite their skill level.

Want to learn more about ERP systems? Click here to book a free consultation and start your grocery store business journey with the Gofrugal ERP solution.

Click here to start your grocery business with the right ERP solution