Food is rightfully considered the most consumed goods, so their sale can become a profitable business. But before opening a grocery store, you need to think through the concept of a future retail outlet, choose its location and find the necessary funds.
Is it profitable to open a product store
A person who would like to start trading asks how much it costs to open a grocery store from scratch and whether this venture is profitable. A future entrepreneur at the first stage of preparing for opening a business should decide on the format and size of the institution.
The most profitable form of trading enterprise is considered a supermarket. Its advantages for the buyer consist in a wide selection of products of various price categories, as well as in the ability to view information about the product of interest and only then pay for it. The main advantage for the owner is the profitability of up to 40-60% when properly organized. However, opening such a retail outlet requires a serious investment in money. In addition, there is a very high competition in this segment.
One of the least expensive options is trade via the Internet. However, even in this case, the owner will not be spared from the cost of storage facilities, as well as from the registration bureaucracy and work with suppliers. In addition, the circle of potential buyers will be limited (the main category of clients — people with a time deficit).
If a supermarket is a retail outlet where customers go on weekends to buy a wide range of products, then a small one shop near your home customers come in after work to buy bread and milk for dinner. Young mothers and pensioners are also sent to such outlets. Important advantages of counter-seller establishments located in residential areas are walking distance and the ability to consult with the seller when choosing products.
Another promising and profitable solution for a novice entrepreneur is to open a specialized institution, for example, one that sells farm products. The increasing popularity of eco-friendly, high-quality products provides such enterprises with stable profits.
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Another possible option is to open a food store from scratch, using the following options: the franchise. A proven business model will significantly facilitate entry into this area of commercial activity but will require payment of lump-sum fees and royalties for using the brand and a range of services of the franchisor.
It seems that the best option for a beginner can be to open a small institution in a city, cottage settlement or urban-type settlement, which provides for relatively small monetary investments, a low level of competition and a stable income.
For your information
Before opening a product store from scratch, you should determine its estimated profitability. To do this, you need to calculate the projected net profit (which will remain after making rental, social, tax and other payments), divide the absolute amount of profit by the amount of revenue, and multiply the resulting figure by 100%.
How much does it cost to open a product store
Simple calculations will help you figure out how much money you need to open a grocery store. First of all, you will need to buy or rent a room. You can buy the pavilion itself for about 500,000 naira, but rent it-from 100,000 naira in the capital and from 40,000 to 50,000 in provincial cities.
You will need 200,000 — 500,000 naira for purchasing equipment (refrigerators, display cases, racks, cash registers, cabinets, tables, etc.), and 180,000-500,000 naira for purchasing goods. At least 80,000 naira a month will be spent on the salary of sellers (if there are 4 employees with an average salary of about 20,000 naira).
Additional expenses include cleaning services, fire alarms, security, and obtaining licenses to sell alcohol and tobacco products. Accordingly, the cost of opening a product point will not be less than 900,000 – 1,500,000 naira.
But how to organize your own small grocery store, if a novice businessman does not have the necessary amount of money? He has three options:
- Attract a professional investor which will not only provide the necessary amount but also help to increase the effectiveness of the idea. The disadvantage of this option is the need to deduct a percentage of income to the investor for life.
- Take a Bank loan. However, today loans are issued at high-interest rates and only if certain conditions are met. In particular, the borrower’s previous employment should be related to organizational functions. They must also have an impeccable credit history, provide a complete set of documents (including a business plan), and pledge their property.
- Take advantage of the state subsidy. It is granted to persons who have been registered at the employment center for a year and have not been employed. The main advantages of such assistance are that it is provided free of charge (you do not need to return the money), while the main disadvantage is a small payment amount (59,000 naira).
Preference should be given to one or another option, depending on the size of the equity capital and the format of the future trading enterprise.
How to start a grocery store from scratch
What do I need to open a grocery store (other than money)? First of all, a business plan. Proper preparation of this document allows you to properly organize the work of the enterprise and make adequate forecasts of its development. A business plan is a step-by-step guide to opening a grocery store and doing business at first. It describes the principles of operation of the point of sale, its format, assortment, working schedule, and so on.
By the way
If you intend to open a grocery store but are not sure of your business knowledge, you can order a plan from a specialist. It is compiled by a financial adviser. Such specialists work in audit, consulting and legal organizations. You can also buy a ready-made business plan, but only if it was drawn up for an enterprise that is as close in its parameters to your institution as possible.
First steps: where to start
Before starting to develop a plan, you should carefully consider the concept of the institution, the specifics of its operation, conduct marketing research and market analysis. It is necessary to study the nearest competitors, highlighting their advantages and disadvantages. A detailed analysis will help you determine your market entry strategy.
You also need to create a portrait of a potential client. For a small city store, this can be, for example, a person purchasing basic necessities (dairy products, bread, groceries, confectionery) for an amount of about 200 naira. For such a purchase, it is not advisable to go to a supermarket located at a significant distance from the house.
Creating and setting up production processes
If you have already decided what you need to open a product store, then you can get down to business. First of all, you should choose a room. Up to 50% of revenue depends on the correct location of a retail outlet. In order not to make a mistake with the choice, you should analyze the “preference zones” and open the enterprise exactly there.
We recommend placing a small retail outlet at least 100-500 meters away from the nearest large supermarket. Preferably near high-rise buildings or in courtyards. Potentially profitable is an institution located no further than 100-150 meters from four high-rise buildings (where about 1,500 people live).
For an enterprise within walking distance, you will need a room of 30-50 m2 (for a supermarket-150-300 m2). It can be rented (usually retail enterprises rent out premises on the first floors of high-rise buildings, as well as detached buildings) or purchased. The advantage of ready-made modular structures is that they can be installed in any suitable location.
Do you want to know how to open an online store of products that will really make a profit? First of all, pay special attention to the selection of personnel. For a small online company, 2-4 sales consultants will be enough. The work they perform usually does not require special qualifications, but the culture of communication with customers should be high. In order to motivate staff to perform their work efficiently, you can introduce a piecework-premium form of remuneration. In addition to sellers, you will need a cleaner, a security guard, 1-2 movers and 2-4 couriers.
The question of how to open a grocery store from scratch, it is impossible to answer without mentioning the permits that a novice entrepreneur will have to get from registering and controlling authorities. The list of securities includes:
- Permission to open a retail outlet (to get it, you need to enter your data in the General commercial register).
- Documents about the business entity: Memorandum and articles of association of the company, the certificate of registration of the businessman on the tax account, a certificate of registration codes of the state statistics Committee;
- Documentation related to the retail premises: lease agreement or a copy of the certificate of ownership, BTI-plan, contracts for fire alarm and disinsection, conclusions of the Federal service for supervision of consumer protection and consumer protection, waste disposal agreement, certificate of employment (in accordance with SP 126.96.36.1996-01).
A book of complaints and suggestions, as well as the text of the law on consumer rights protection, should be located in the sales hall of the enterprise (in the corner of the consumer). All employees are required to have medical records.
At the next stage, you need to decide on the range of products that will be sold. The optimal setting for a small retail outlet: essential goods, dairy products, sausages and cheeses, cereals, pasta and confectionery, canned foods, tobacco products, alcohol and stationery.
Special attention should be paid to finding suppliers. The best option is to deliver products from large wholesale bases on a cyclical schedule, it can be carried out on its own. A promising option is to purchase agricultural goods directly from farms. Such a solution will save money on intermediary services and provide customers with fresh and high-quality products.
The development of a marketing plan
Step-by-step instructions on how to open a food store should include such an important point as advertising the establishment. The most significant in this regard is the first months of its operation because it is during this time that potential customers get acquainted with a new retail outlet. Therefore, it is important to make a positive impression on potential buyers.
It is important to organize the opening correctly. To increase the clientele on this day, you can arrange a holiday: decorate the entrance with balloons, hold interesting events, for example, to give gifts for shopping, or arrange a contest, according to the results of which customers can win small appliances. In the future, it is also recommended to conduct promotional campaigns, develop a discount system and issue regular discount cards.
An entrepreneur who wants to understand how much money it takes to open a grocery store, and what the level of profitability will be, needs to make a universal estimate that includes all planned income and expenses. You should consider not only the cost of the opening ceremony but ongoing monthly expenses.
Initial costs include renting or buying a room (about 100,000-500,000 naira), purchasing equipment (300,000 naira) and video surveillance cameras (20,000 naira), creating inventory (250,000 naira), as well as all sorts of additional expenses (30,000 naira). Current expenses include salaries of employees (about 20,000 per person, which with a staff of 4-5 people is 80,000-100,000), utility bills and taxes (40,000). Accordingly, the initial cost will be about 700,000-1,000,000 naira, and the current cost will be about 140,000 naira per month.
If the mark-up on food and household chemicals is within 35-45%, the company’s profitability will initially be about 12-13%. In the most favorable scenario, the business will pay off in 8-9 months.
So, if you want to open a product store, but you don’t know where to start, first of all, decide on the location and concept of the enterprise, calculate variable and fixed costs, possible profits, draw up a business plan, find investors and suppliers. If you organize your business correctly, you will start making a profit from the very first days of operation of your retail outlet and recoup your costs in less than a year.
Undoubtedly, the farm shop is a growing trend in the trade of agricultural products. In Europe, such grocery outlets have long been popular among the local population, which provides them with a pool of loyal and regular customers, with whom they have established trusting relationships. In Nigeria, this segment is not yet highly competitive, so success here will depend on who will be the first in the chosen territory.