How to Start a Supermarket

The sudden onset of the Covid-19 pandemic in 2020 has acted as a catalyst for the sudden proliferation and growth of online supermarkets worldwide. Customers nowadays increasingly prefer a digital, contactless mode of purchase, payment, and delivery. Most supermarkets currently have digital user-friendly omnichannel models to service customers online through message and call-driven personalized deliveries, along with real-time local grocery applications, and websites. 

A recent Goldman Sachs report predicts that India’s e-commerce numbers will reach $99 billion by 2024, growing at 27% CAGR over 2019-24, with grocery and fashion/apparel likely to be the key drivers for this huge growth. A spacious, self-service store consisting of floors, sections, and shelves, supermarkets offer a larger variety of goods and products vis-a-vis normal groceries, all under one roof, with traditional brick-and-mortar supermarkets consisting of physical stores in one or multiple locations.  

Important steps showing how to start a supermarket 

Here is a step-by-step guide explaining how to start a supermarket business:

1. Supermarket Business Plan / Business Model: Drafting a supermarket business plan is vital, to create the blueprint or process roadmap for the business. The business model or financial plan helps to assess the business investment and operating costs needs (i.e. the daily business maintenance expenses). It helps to calculate the ROI, which measures the amount of return accruing on a particular investment, with respect to the investment's cost. It also seeks to analyse the feasibility of the business by estimating the breakeven or baselines sales level, which is required to avoid incurring losses under a given reporting period.

2.Product Category Finalization: Supermarkets generally witness higher-volume transactions vis-à-vis smaller stores. Product category selection and finalisation depend on crucial factors like supermarket type, size, selling strategy, and expected margins. Ideally, the entrepreneur should maintain a blend of high-quality FMCG items like grocery/food and non-food (low and high margin products respectively) to ensure better product coverage, margins and ROI. Accurate demand forecasting in product procurement has also become essential in modern times. Analytical and Business Intelligence tools with built-in auto-replenishment systems are commonly used to simplify the procurement process.

3.Layout Planning: Supermarket layout design and layout planning play a vital role in loss prevention, holding the key to consumer behaviour and the supermarket's overall success. Layout planning is essentially the efficient utilization and distribution of the supermarket’s floor space and shelves, including the placement of products therein. A good store layout strategy determines optimum customer and goods flow, customer entry & exit points, cash counter locations, and storage provisions. The entrepreneur has to decide the optimum operational layout of the store by factoring in pilferage. The grid layout is most commonly used, containing long linear pathways parallel to each other, creating a grid.

4.Organizational Structure: The Organizational structure is defined by mapping people to their respective positions, roles, salary structure, job profile, and the overall reporting structure and hierarchy. Hired personnel should normally be assigned to departments based on their skillsets, experience, and aptitude. They should receive thorough training on how to deal with customers 

and also given product and job briefs, to which they have to adhere to. A standardized SOP or employee handbook has to be created and enforced right from the start i.e. from day 01, and this shall provide transparency to the work culture.

5.SOPs: SOPs or Standard Operating Procedures are clearly defined, instruction or process manuals documented for specific departments, tasks, and processes. Defining, the Who, Whom, What, Why, Where, When, and How of a business process or operations, SOPs help to implement the best practices, process automation, productivity improvement, and a reduction in error rates in the supermarket. Thus, the business owner can move away from managing routine daily operations and focus on more strategic items like business expansion/scaling, consolidation, and customer experience.

6.Enterprise Software Evaluation & Selection: No supermarket startup can be efficiently managed without the right agile enterprise software. Wrongly selected inferior software may lead to poor inventory and sales management. The selected software should have multichannel compatibility, seamless ERP (Enterprise Resource Planning) store integration with business functions like purchase, accounting, PoS systems, inventory, and multi-location operations. Thus, selecting the right enterprise software for the supermarket helps in effective monitoring and system management, and also to prevent losses and achieve sustainable growth.

7. Staff Management and Training through SOPs: SOP training to supermarket staff would incorporate the full range of training activities into one system to ensure that all employees acquire the requisite skills, knowledge, and qualifications needed to effectively carry out their duties and job responsibilities. These SOPs would be defined for all business departments like Purchase, Accounts, Marketing & Sales, Cash Counter, Inventory Management, etc. The primary responsibility of SOP training for the staff lies with the HR, Training Department, and specific functional head. Change in policies could result in a consequent change in procedures, which should then be communicated to the departments and employees. Thus, SOPs are a must to ensure the supermarket is system-driven, otherwise, everyone shall have their own way of managing things and the supermarket could well become another mom & pop shop in the neighbourhood.

How to manage a supermarket - Key challenges encountered 

While opening and managing a supermarket, there are various practical obstacles and challenges faced by every prospective entrepreneur. The common real-life challenges encountered by business owners can be highlighted as follows:

Supermarket Stock Management & Inventory Management: Whenever there are inflationary pressures and reduction in sales, dealing with perishable or slow-moving inventory becomes a real problem. Deadstock/ Overstocking is one of the prime reasons for a supermarket’s failure. Products need to be always readily available, and in the right place at the right time. Inventory planning and timely stock replenishment help prevent deadstock, overstocking and out-of-stock situations. Every supermarket business idea needs to have a robust supermarket inventory management system, especially the ARS i.e. auto-replenishment system and a well-defined planogram. The ARS is an automated system that analyses inventory levels and lead times and re-orders stock to meet future sales needs. 

Quick Service: In today's digital world, everything is expected fast and delivered to you in a jiffy. Thus, the processes and systems have to be defined in such a way as to avoid any delays in billing and delivery, otherwise, it can hamper customer experience. Ways to speed up the supermarket billing and delivery process are to accommodate different modes of payment and checkout preferences like mobile pay and virtual wallets (even in physical stores), contactless card readers using tap-and-pay technology, buy online pick up in-store (BOPIS), wireless payment terminals to accelerate the checkout process, self-checkout kiosks, and emailed digital receipts.

Expectations for Value-Added Services (VAS): For any supermarket business idea, it was never only about selling the products. Nowadays, to ensure customer retention and the addition of new buyers, value-added service offerings are key to optimizing the customer experience (Cx). Customer loyalty is thus won by the VAS offered i.e. efficient customer service provided through well-trained employees, customer loyalty programs, discounts on future repeat purchases, convenience through customized home delivery and multiple digital payment modes, expert advice for buyers through interactive customer support via social media channels, exclusive access to special products, deals and events, quick billing counters, comfortable sitting provisions for senior citizens in brick-and-mortar stores, etc.

Perishable/Slow Moving products: An eagle eye and constant monitoring is needed to ensure that the perishable products (i.e. grocery items, processed foods and beverages, ready-to-eat meals, fresh, frozen, and dry goods, etc.) having a shorter shelf life are sold out quickly and the slower moving products are pushed by offering discounts, offers and lucrative deals on them. Thus, this process mechanism must be system-driven and not person-driven. A poor supermarket management system for perishable & slow-moving products is one of the major reasons for a supermarket’s negative bottom lines and poor financials.

Supply Chain and Logistics Management: For retail start-ups like supermarkets, it is important to have the right product at the right time, and in the correct quantity on the store shelves. Thus, logistics and inventory management play a critical role in the overall smooth functioning of the supermarket. Partnerships have to be created with suppliers, shipping services, and warehousing companies, and by linking these services through automated systems, the logistics of getting products to the consumer are improved upon with reduced overhead costs and faster delivery. Cost-saving is achieved by reducing warehousing costs and purchases based on supply forecasts, better inventory management, reliable shipping, and timely deliveries to the end-users or customers.

How YRC can be your advisory partner teaching you how to start a successful supermarket 

A supermarket setup is a serious business requiring extensive guidance and meticulous planning. YRC's unique consulting methodology is designed to enlighten you with the best industry practices and innovative strategies necessary to help you overcome practical challenges and build a successful and sustainable supermarket business. By hand-holding you every step of the way, we ensure that you do not make the most common mistakes generally made by entrepreneurs. YRC coaches you on how much capital is needed to start a supermarket, addressing key issues like investing in the right resources at the right time. Importantly, by teaching you the common DOs and DONT's and loss prevention techniques critical for your business, we help you avoid unnecessary cash burn and financial losses.

All about YRC 

Based out of Pune, India, Your Retail Coach (YRC) is one of India’s leading retail eCommerce consultants specializing in a wide range of customized retail services and solutions, including supermarket setup consulting and advisory services. The company has years of proven expertise in every sphere of eCommerce consulting and has successfully established franchise business models, and SOP frameworks across critical business functions. Spearheaded by experienced retail experts and market strategists, YRC has also been a transformational partner for numerous retail start-ups, with a proven track record in setting up successful retail businesses and start-ups.