The idea of establishing a successful and profitable supermarket business is popular because of its high success rates, and the ease of saving project expenses and operational costs from the start.
The supermarket is like any other business, in that it requires the preparation of a feasibility study that considers all stages of implementing the idea, the outputs of the business, and how to avoid losses and increase profit opportunities from your supermarket in a more effective manner.
You may find when conducting a feasibility study for a supermarket business that it is a profitable idea in general, and can achieve a very good daily income, and the profit margin can be increased in a variety of ways.
This project is also suitable for those who are inexperienced.
In this article, we discuss the advantages and disadvantages of the supermarket project, the feasibility study and its importance, plus how to create a feasibility study for a supermarket business.
What makes a supermarket business successful?
- Appropriate financing and financial planning: This includes securing financing for the cost of a supermarket startup in order to build and operate it, and also creating a comprehensive financial plan that accounts for costs such as inventory, staffing and marketing.
- Strategic location: The supermarket must be located in a convenient area that is easily accessible to consumers, with easy transportation, and it must be located in a well-populated area.
- Having effective and strong management: The person in charge of the supermarket must have management and leadership experience to oversee day-to-day operations and long-term planning.
- Effective Marketing and Customer Service: This involves building a strong brand and reputation, as well as providing excellent customer service to attract and retain customers.
- Having a strong supply chain: The supermarket must have a well functioning supply chain, logistic system to ensure easy availability of stock and delivery of goods in a timely and efficient manner.
- Strong IT Infrastructure: The supermarket’s IT infrastructure must be strong, so that it can support operational management, inventory and security.
- Compliance with legal and regulatory requirements: The supermarket business must comply with all relevant local building, operation and safety laws and regulations.
- Providing competitive prices: Providing competitive prices for the goods and services offered by the supermarket is important to attract and retain customers.
- Provide high-quality products and services: A successful supermarket must provide a variety of high-quality products and services, such as fresh produce, meat, and bakery products.
- Focusing on sustainability and environmental protection: The supermarket must implement sustainable practices to reduce its environmental impact, such as reducing packaging waste, using energy-saving lighting, and promoting recycling programs.
Potential problems with feasibility (and their solutions):
Possible disadvantages and problems with the any supermarket startup include:
- High start-up costs: The cost of opening a supermarket can be significant, which may hinder some entrepreneurs. Solution: Careful financial planning and securing funding from investors or financial institutions helps mitigate this drawback.
- Stiff competition: Supermarkets face stiff competition from other retailers, whether in physical stores or online stores. Solution: Supermarkets can differentiate themselves by providing unique products, excellent customer service, and a convenient shopping experience that attracts customers.
- Having low profit margins: Supermarket businesses often have low profit margins, which can make it difficult to make a profit. The solution: To increase profit margins, supermarkets should focus on cost control measures, such as reducing overhead costs and increasing efficiency.
- Dependence on suppliers: Supermarkets and convenience stores are highly dependent on suppliers of goods, which can make them vulnerable to supply chain disruptions. Solution: Building strong relationships with multiple suppliers, and having a backup plan in case supply chain disruptions occur, helps mitigate the negative effects of this dependency.
- High operating costs: Running a supermarket can be expensive, with expenses such as rent, utilities, insurance, stock keeping, labor costs, hiring and marketing. Solution: Accurate budgeting and cost savings such as reducing energy consumption and waste help reduce operating costs.
- Food waste: Supermarkets suffer from a large amount of food waste, which is not only costly but also harmful to the environment. The solution: Implementing programs to reduce food waste, such as reducing overstocking and selling food waste to fertilize plants, as this can help alleviate this burden.
- Lack of personalization: Supermarkets often lack the personalization that customers might expect from smaller retailers. Solution: Offering customized products and services such as private labels and home delivery options helps mitigate this.
- Limited storage space: Supermarkets often have limited inventory space, which can make it difficult to stock a variety of products. Solution: Implementation of an effective inventory management system and the use of technology such as RFID tags will help mitigate this drawback.
- Difficulty adapting to online shopping: Supermarkets may have difficulty adapting to the rise in e-commerce, which can make it difficult to attract and retain customers. Solution: Investing in an e-commerce platform and offering home delivery options helps supermarkets adapt to consumers’ desire to shop online.
Staffing requirements in a supermarket business
The labor and staffing required for a supermarket varies according to the size and scope of the business. However, some of the common job roles for working on this type of project may be as follows:
- Supermarket Manager: The supermarket manager is responsible for overseeing day-to-day operations, such as staffing, inventory management, and customer service.
- Assistant Manager: The assistant manager supports the supermarket manager, and may be responsible for managing certain departments such as the canned, meat, or bakery department.
- Sales Clerk: Sales clerks are responsible for providing customer service, stocking merchandise on shelves, and processing sales transactions.
- Cashiers or tellers: Tellers are responsible for handling cash and credit card transactions at payment points.
- Warehouse workers: These workers are responsible for receiving shipments and storing goods.
- Cleaners: Cleaners are responsible for keeping the store clean, and restocking supplies such as tissues and paper towels.
- Maintenance Workers: Maintenance workers are responsible for maintaining the physical structure of the supermarket and repairing any breakdowns that may arise.
- Human Resources Personnel: Human resource staff are responsible for hiring and training employees, as well as managing employee relations.
- IT professionals: They are responsible for maintaining the supermarket’s IT infrastructure, such as computer systems and security systems.
- Marketing and advertising professionals: These professionals are responsible for creating and implementing marketing and advertising campaigns to promote the supermarket.
This list is not necessarily the full list when it comes to staffing, as the supermarket owner may need additional job roles depending on the specific needs of the business, and vice versa; For example, small businesses of this type may need two shift workers, each working 8 hour days.
As for medium-sized supermarkets located in bigger areas, they need more employees, in addition to an employee responsible for delivering orders to the homes of customers who may order online.
Feasibility study of a supermarket
A feasibility study in general is an analysis of the potential for success of a proposed business startup, and is usually prepared before spending any significant resources on the project.
A feasibility study usually includes the following:
- Market analysis: that is, studying the local area and knowing whether it needs a supermarket or not, and this includes analyzing the population, demographics, and competition.
- Financial Analysis: This involves creating a comprehensive financial plan that calculates inventory, hiring and marketing costs, as well as projected revenue and profitability.
- Location analysis: This involves researching potential supermarket locations and evaluating the feasibility of each location based on factors such as accessibility, ease of visibility of the supermarket, and parking.
- Operational analysis: This involves developing a plan for the day-to-day operations of the supermarket, such as staffing, inventory management, and customer service.
- Legal and Regulatory Analysis: This includes researching local laws and regulations that apply to the establishment and operation of supermarkets, and evaluating the feasibility of complying with these regulations.
- Environmental impact analysis: This includes assessing the environmental impact of the supermarket and identifying potential environmental risks, such as waste management, emissions from delivery trucks, and energy consumption.
- Technical analysis: This includes evaluating the technical feasibility of the project, such as the availability of utilities such as water and energy, and the ability to construct the building in the chosen location.
- Risk analysis: This includes identifying potential project risks, such as economic downturns, supply chain disruptions, or changes in consumer preferences, and developing strategies to mitigate these risks.
- Organizational Analysis: This includes assessing the supermarket’s organizational structure and management team, including the experience and qualifications of key employees, and identifying any potential gaps in skills or resources.
- Quad analysis (SWOT analysis): Quad analysis or what is known as SWOT analysis is a tool used to evaluate internal and external factors that may affect the supermarket project, such as strengths, weaknesses, opportunities and threats.
- Social and Community Impact Analysis: This includes assessing the social and community impact of the supermarket project, including potential impacts on local businesses, traffic and noise, and public services such as public transportation.
Note: Whether you are working on supermarket business feasibility, a mini-market business feasibility study, or a grocery store business feasibility study, the elements within will be mostly the same.
The results of the feasibility study will provide a comprehensive assessment of the project’s potential for success, and should be used to decide whether or not to proceed with the business at all.
Should competitors be studied, too?
Yes, it is important to study competitors in the same field when conducting a supermarket feasibility study and developing an executive plan for a supermarket business. The competitive analysis will provide valuable information on the strengths and weaknesses of other supermarkets in the area, in addition to identifying opportunities and threats that may come from competitors, which may benefit or harm the proposed project.
Competitor analysis will help you determine:
- Market Share: Understanding the market share of existing supermarkets in the area provides insight into the potential demand for a new supermarket.
- Target Market: The target market analysis of existing supermarkets provides insight into the demographics and preferences of consumers in the area.
- Product and service offerings: Understanding the product and service offerings of existing supermarkets helps identify opportunities to differentiate the new supermarket with unique products or services.
- Pricing Strategies: Analyzing the pricing strategies of existing supermarkets helps identify opportunities to offer more competitive prices and attract budget-conscious consumers.
- Marketing and Advertising Strategies: Analyzing the marketing and advertising strategies of existing supermarkets helps identify opportunities to reach new customers or build a stronger brand.
- By conducting a competitor analysis, the founder will understand the market well and will be able to make informed decisions about the feasibility of the project and how to put it into action.
How does Al Raedah help you to open a supermarket project without capital and with minimal risks?
Al Raedah provides POS financing for supermarket owners and small and medium businesses wishing to improve and develop their projects and services or open a new project or branch with flexible financing and in record time.
Given that Al Raedah is one of the best point-of-sale financiers in Saudi Arabia, we offer facilities that you will not easily find with other financing companies, along with simple and easy conditions that allow you to obtain the optimal financing for your business in record time.
The facilities provided by Al Raedah to finance your supermarket
You will not find an easier option than Al Raedah to obtain financing with the guarantee of points of sale. If you need financing in record time, you can complete the required documents and potentially receive the financing amount within 5 working days. This is very useful if you have urgent expenses and need to pay them within a specified period. With Al Raedah Finance, there will be no delays.
It does not require financiers to pay its installments monthly, as the financing of small and medium enterprises is simply paid from daily sales.
Because Al-Raeda Company is fully aware of the customers’ needs, it deducts financing fees from the financing amount itself, and does not ask the customer for excessive amounts in repayments. Al-Raedah deals with you with clarity and transparency and does not deduct any hidden or sudden unfounded fees.
Wherever you are located in the Kingdom of Saudi Arabia, you will be able to obtain financing at your points of sale.
The application procedure is so easy that you can complete them through the website online, and there is no need to submit financial statements, just your account statements to obtain financing for small enterprises.
Al Raedah allows you to obtain financing starting from 50,000 and up to 7 and a half million Saudi riyals within a repayment period that lasts from one to three years.
Funding carries on as the supermarket grows, which means Al Raedah is playing the role of partner; The more the business continues to thrive, the financing process can continue.
We have simplified the most important advantages and disadvantages of a supermarket project, in addition to helping you establish how to create a feasibility study for a supermarket business.
Our article has shown you the benefits to doing a feasibility study for a supermarket business before starting it, answering all the questions you may have in your mind about the process.