Retailing has become the latest trend now and this should possibly be due to the emergence of a number of technologies and industries supporting retail business. In that context, super markets have gained extreme welcoming by the public. All these are purely due to the expected comfort level of the consumers and the change in standards of living. You, as an entrepreneur can make these optimistic factors as a motivation to start a supermarket business. In this article you will learn about how to start a supermarket, license required to run this business smoothly and important components of investment with cost estimation to setup a supermarket in India.
Opportunities in Supermarket Business
Supermarkets can never put your business in loss, since the frequency of buying grocery and other daily needs is quite high. All you require is a very pleasing surrounding with all the items a customer will look for. Supermarkets are appreciated for the availability of all the items under one umbrella. Now, it’s you who should make this situation exist in your supermarket.
As a business person, you are supposed to attract as much as customers you can. This is made possible by using every single opportunity to enhance your service and to make your brand or company stand unique from the market. Your opportunities to enhance your concern’s value are creating a customer database, having memberships, providing home deliveries, etc. These opportunities are to make the customers stick to your supermarket and to prevent them from using your competitor’s products.
Business Planning & Establishment
Before you start investing or indulging yourself in any activity relating to the establishment of the supermarket, make a business plan or formulate few things which are necessary for starting the business. This will assist you in implementing the right procedures and making the best use of your investment.
Investment Required to Start a Supermarket
This is the core element of the business which decides the functioning efficiency and the business size. Thus, proper and clear forecasting as to how much to invest is needed to meet the company’s needs in future. Make sure you plan for a supermarket which can be operated with the amounts you have. If not, you will find it hard to run the business due to insufficient cash. Always have the at least quarter portion of the total investment safe for further operations. This is because you will have to face the fluctuations in business on your own.
Investment in this business is dependent on 5 major components which are:-
- Cost of Leasing or renting a shop in proper location.
- Setup cost of the supermarket such as interior design and number of racks.
- Purchase of products in stock.
- Business setup cost like obtaining license from required authorities.
- Tech investment such as CCTV, billing counter, billing software, etc
Approximately a mini supermarket (1500 sqft) will require 40 lakhs as an investment in India. It’s your decision to expand your business in future with more funds or profits from the business. This estimation is for a business operating in medium size with minimal facilities. If you think you can manage finance for a huge sized super market, then you can confidently invest a crore rupee.
A very keen accountant is to be appointed to have a record of all the transactions. Regular auditing is required to track the company’s progress and to determine areas of improvement. The first year’s transactions are used for inferences regarding the costs incurred and the profits earned.
License and Other Legal Arrangements
It is mandatory for any business to obtain legal documents to prevail in the market and to be listed in any governmental listings of business. It is basically a recognition and a means to categorize your business under relevant heads. Legalized business will always be in the safer side since the documents you possess is valid.
Also, according to the court and laws, your legal documents stand as a proof when there is any complaint from the consumer. The existence of your business should not be questioned or complained by any individual or a group and for that, you will have to keep your legal documents and certificates ready. There are a variety of licenses and registrations required according to the elements in your business. First one is registering your shop or supermarket under the Shops and Establishment Act. Taking this as the foundation, you will proceed with the following.
Starting form basics, there is a necessity to obtain contract of lease if you are operating your business in someone else land or property. This contract is mandatory since there is a special governing body called the Rent Control Act to follow up. A rental agreement or a lease contract for residential purpose is completely different from what you have to obtain for a commercial purpose. The contract should contain details relating to working hours, maintenance etc. The various specifications needed are,
- Rent, Deposit, Maintenance charge
- Code compliance
- Amount of payment
- Consequences on violation of the contract
- Working hours on the property
- Renewal terms
- Alteration permission
- Authority to Sublease
- Name and Address of the tenant and landlord
The above case is when the land is rented or taken for lease. But, if you are the land owner you do not have to possess these documents. Regarding the land, the ownership document of the land is alone needed.
As the owner of the business, you should obtain a trade license from the municipal authority. Irrespective of the business purpose, all businesses should have a trade license to operate in the market. It is to assess your business in ethical, safety, standard and regulatory aspects. It usually takes 8 days to obtain a trade license from the local municipal authority of your respective state. This can be extended if you lag in submitting the necessary documents. The extension can also be due to breach of any of the terms and conditions mentioned in the trade license. The documents required to obtain a trade license are,
- A photograph of the super market with goods that are being sold (front facing)
- PAN Card
- Certificate of Establishment
- Photograph of the owner
- ID proof of the owner
- Address proof of the owner
- Bank statement of the establishment of trade
- Premises proof
License from FSSAI
If your supermarket has food items as one of the products, it is necessary for you to obtain FSSAI license. It is said that any business selling food items will come under “Food business” under Food Safety and Standard Authority India. If your supermarket has more outlets, then there is a need for Central license for the head office. The FSSAI license stands cancelled after a period of 5 years if not renewed.
As we all know, Goods and Services Tax is being an inevitable taxation norm laid in all businesses. Your supermarket should have a 15-digit GST pin which you will get after registering your supermarket under GST.
Location is a very important factor which directly affects the sales. For example, a supermarket in a rural area will definitely not make much sales. This is because, the public and consumption pattern is different there. They prefer buying from small petty shops to supermarket. Thus, with regards to the location of the supermarket a clear analysis of the market is needed.
Records say that there exists a supermarket every 5kms in urban areas which is actually a considerable count. So, in this way find a place where there should be a super market and where the costs of renting the place is also minimal. In a business, inducing sales is alone not important since having a better cost control determines the survival of the business.
Supermarkets require many staff including skilled and unskilled since the industry is labor intensive. Procurement of right staff makes the operations of the business successful. Also, placing the right people at right positions avoids hindrances in the functioning of the business. Some of the important positions are,
- Marketing manager
- Store head
- General staff
- Cleaning assistants
- Sales person
- Stock supervisor
Selection of Vendors
All the supermarkets run usefully in the market and the success may be due to a mix of various reasons. But one major reason in all the mixes will be the difference in prices favoring the customers. This can be achieved only if you highly rated vendors. Vendors play a very important role in making the business a very popular one. Vendors not only provide stock, but also promote the business as an additional service.
Choosing the right vendors will help you in getting products at a very reasonable cost so that you can allow discounts to your customers. Vendors also do stock management, which is technically known as Vendor Managed Inventory VMI. If your vendor does management for your inventory, then you can possibly eliminate the need for a separate inventory manager.
Vendors should be selected after proper research since it is a long-term relationship. Vendor rating is checked before choosing a vendor and this rating reveals information about their past performance. Their delivery efficiency is also important as they may affect your sales whenever there is a deficiency.
Your supermarket should have all the items so that your customers do not get disappointed due to unavailability. But here too you can make choices whether to have groceries alone, add perishables with it, have apparels, home appliances etc. Whatever the choice, make sure you have all the items under that category. The next notable factor after diverse items is, the quantity you procure. Keep enough of stock so that there is no situation of stock out. Fix your reorder levels and maintain a very efficient stock. Too much stocking is also an issue since they may lead to loss because of expiry dates and unavoidable damages.
Supermarket Layout Planning
After ordering and receiving the items, it is your creativity and strategy to arrange it in such an appealing manner. This comes associated with an efficient layout designed for your supermarket. Make the layout precise and clear cut without any confusion and discomfort to the customers. Arrangement of the items in your supermarket is also an art since they too contribute in pulling the customers. Showcasing all the available products according to their category and level of importance is mandatory
Customers should be able to identify their products at one sigh. I would recommend a small board with design and arrangement of items in the supermarket. This is again a unique idea which will make your supermarket different from the rest.
Support Tools and Equipment
Apart from stock, there are few other physical items to be present in your supermarket. These items are placed under the support systems and these items should be maintained regularly. Some of them are baskets, trollies, scanner, bar-code reader, computers, feedback machines, billing machine, card machine, ladders and chairs for the staff to arrange items, shelf to get store the customer’s luggage, weighing machine for perishables, refrigerators etc.
Marketing and Promotional Ideas
More than the establishment of the supermarket, planning regarding publicity and marketing makes people know the existence of your business. Marketing managers should be capable to make promotional plans and to increase sales. Here, the motive of the marketing manager is not to publicize or promote any brand but to communicate to people about the super market and its products.
Promotion can be done by allowing discounts and offers. Try to adopt feasible promotional ideas so that you are not in trouble later. Consider your financial ability before announcing any offer. Make new posters and pamphlets whenever you adopt new promotional ideas.
Memberships can be included to create a customer database which can be profitably used for future purpose. Tie up with major brands and negotiate for offers and provide exclusive items at varied prices only at your supermarket. Keep yourself updated with latest products and demand which is necessary to sustain in your market.
The vehicles used for home delivery has to registered for its commercial purpose. If a motorbike is found to be used for commercial purpose with private registration, then there are high chances of trouble. The RTO has the right to seize the bike under such circumstances. But, when it comes to bicycles, there are no restrictions laid. You can make use of bicycles for delivery purposes to cut down these registration charges.
Apart from the specified licenses, there are few other miscellaneous things to be taken care of. For promotion you might use bright lights and attractive boards, but these too have certain restrictions. This can be checked with your local municipal authority.
Concluding, you can be a successful business person if you take into consideration all the necessary factors and regulations to own a super market. Regarding ownership, I would recommend you to have sole proprietorship than partnering with other individuals. This will eliminate delays in operation or functioning due to pending decisions from your partner.