In a recent post, the National Grocers Association (NGA) stated that the top 3 emerging trends in grocery are “Merchandising, Pricing & Promotions, and Loyalty.”
Implementing these trends will not only help established grocers but also newcomers to increase sales at grocery stores.
The grocery store business is a lucrative market for entrepreneurs to explore. For one, it contributed $1 trillion in sales in 2023, and second, the average weekly grocery spending per household is $165 (Feb. 2024).
This post presents a 9-step guide on how to open a grocery store, investment required, product management & diversification, location, tools like grocery store POS system, and much more.
Let’s begin.
How to Open a Grocery Store: 9 Steps to Consider
Grocery stores, otherwise known as supermarkets, sell food and household items. These store owners focus on budget-conscious buyers and rely on high volume sales. Whereas high-end stores leverage premium-quality groceries, organic and local produce, and a unique product mix to cater to a niche audience. Defining your audience plays a key role in increasing sales at grocery stores.
When you plan to open a brick-and-mortar grocery store with an online ecommerce platform, there are certain factors to be considered. These include defining your brand, creating grocery or supermarket business plans, setting up bank accounts, forming a legal entity, obtaining licenses and permits, and more.
Let’s discuss all the above-mentioned requirements to start a grocery store.
- Business Name
Start with registering a business name for your grocery store. You will have to choose a business structure, such as a sole proprietorship, LLC, etc., for taxation and operational purposes. Establishing a legal entity can protect your grocery store from any financial hiccups.
- Set Up Bank Accounts
One of the key steps in opening a grocery store is to have a dedicated bank account. Your banking partner can help you protect business assets and facilitate you with business credit cards, financing, higher lines of credit, and even a business loan. Based on your grocery store operation cycle, you can apply for a Net 30, 60, or 90 account. With such a business account, you can purchase goods in advance and repay the balance within a 30/60/90-day period.
- Location
Before opening your grocery store, survey various sites to finalize the location. The grocery store business mainly thrives on frequent repeat traffic and loyal customers. You’ll need to assess the foot traffic, parking availability, visibility, proximity to other businesses, demographics of the area, and whether it’s close to a hospital, school, or town center.
The easiest option to start a grocery store is to lease a commercial space instead of buying or building. Leasing a property allows you to quickly set up and start running your grocery shop. Of course, having your own space gives you freedom to design, but it can take up a huge investment. Leasing commercial property will drastically reduce your costs to open a grocery store that can be utilized for, say, a grocery store POS system, equipment, or marketing to increase sales at the grocery store, etc.
- Grocery Store Startup Costs
The cost to start a grocery store largely depends upon the type of business model. Whether you are taking a franchise or starting your own small grocery store, the startup cost to open a grocery store will also vary depending upon who you target. Let’s say you are targeting B2B (business to business), B2C (business to consumer), or D2C (direct to business) models.
One of the easiest ways to calculate the cost to start a grocery store is by bifurcating the fixed costs, on-going expenses, and one-time funds required. Many grocery or supermarket startups also seek funding from SBA (Small Business Administration) by securing a loan, grant, etc.
- Legal Entity and Taxes
Besides choosing a business name and structure (as seen in point no. 1), there are other legalities to take care of before opening a grocery store. You’ll have to set up federal and state taxes through various registration methods. You may need to hire a professional or an accountant to handle your grocery shop books.
- Licenses and Permits
Permits, licenses, and insurance are an integral part of opening and operating a grocery store. These regulations ensure that your business operates within the law.
6.1) Business License – It is a must to legally operate a retail store. This is issued by the local, or county, which ensures compliance with local regulations. The application process involves submitting a form with your business details and a fee, which needs to be renewed annually.
6.2) Seller’s Permit – This permit (sales tax) allows to sell products and collect sales tax on goods sold to customers. This permit is issued by the Department of Revenue or Taxation, and the permit must be displayed in your store. To obtain a seller’s permit, you’ll need to furnish details about your business, including a federal Tax ID number (EIN), business structure, estimated sales, etc.
6.3) Employer Identification Number (EIN) – This is issued by the IRS to report employment taxes, open a bank account, and file tax returns. You can apply online, and there is no cost for it.
6.4) Zoning Permits – Zoning permits ensure that your retail grocery store location complies with local zoning laws. Before signing a lease or buying a property, check whether retail operations are permitted for the site. You may need to submit a zoning application and site plans and a fee to obtain this permit.
6.5) Certificate of Occupancy – The CO document is issued by local authority and certifies that the building is compliant with building codes and other laws, including fire and health departments.
- Hire a Team
Hiring the right people can guarantee the success of your grocery store. Depending upon the operations, you may want to hire store managers, sales associates, cashiers, and customer service representatives. Educate and empower your team with hands-on practice, scenarios, and training to enhance the customer experience.
- Essential Equipment
Opening a grocery store requires you to load up essential equipment that includes:
- Commercial freezers and refrigerators
- Shelving & other furniture
- Grocery point of sale (POS) system including cash register, scanner, display, etc.
- Shopping carts
- Signage
- Lighting
- Packaging supplies
- Cleaning supplies
- Office supplies
- Uniforms
- Market Your Grocery Store
You must implement every marketing and sales strategy to increase sales at the grocery store. You may start with the conventional approach of dropping leaflets at nearby venues to spread the word.
Word-of-mouth, a website, a Google business profile, and social media such as Facebook, Instagram, Twitter, TikTok, LinkedIn, etc. may be used to build your brand and create a buzz about your newly opened grocery store.
Wrapping Up
Opening a grocery store may seem easy, but it requires lots of planning and preparation. The ongoing hustle of managing inventory and having the right product mix at competitive prices is crucial to attract new and retain existing customers.
Try FTx POS – a completely customizable grocery POS system. With FTx POS for grocery stores, you can track inventory levels, get low-stock notifications, save time with integrated payment processing, manage payroll and the time clock, have loyalty programs, do quick and easy ecommerce integration, use digital signage, and more.
All in all, FTx POS for supermarkets and groceries includes software and hardware to maximize profits and efficiency. Schedule a demo today!