Do you want to start a grocery shop? Find here a comprehensive guide on how to open a grocery store business in India for your ready reference.
Generally, the grocery store is a perfect business opportunity for metro cities as well as small towns. And you don’t need to have any skill or experience to start and run this business. In addition, the business allows you to initiate in a size that fits your investment capacity. However, trustworthiness and reliability are the major essential aspects of this business.
The grocery shop is a popular retail business in India. Generally, this type of store sells fresh, dry, canned, and packaged commodities directly to consumers. The inventory includes both food and non-food items. However, all are essential household items.
Broadly you can start a grocery retail store in two ways. One is starting your own store and another is opening a franchise. Opening a franchise is comparatively easier than starting your own. However, your own business model will definitely ensure larger profit margins than the franchise.
12 Steps to Start Grocery Store in India
1. Market Study for Grocery Store
A grocery retail store is a heavily localized business. You can only target the neighboring consumers of 2 to 3 Kilometers of surroundings. Therefore, you must study the local market first. Before starting the business, you must have extensive knowledge about your customers as well as your competitors.
Identify the needs and desires of your customer. Additionally, select or develop your product or service that will meet customer needs and preferences. Analyzing your customer will help you to assess the market size and the factors that influence their buying decision. All this information will help you to select the right location, determine the product, and fix the right sales strategy.
2. Select Your Grocery Store Format
There are various formats to consider when starting a grocery store in India. It can be a traditional brick-and-mortar store, a neighborhood convenience store, or even an online grocery delivery service. It is without saying, each format has its own advantages and challenges. It is essential to understand your target market, location, and available resources in your locality. It will help you to determine the most suitable store format that aligns with your business goals.
3. Select the Right Location
Selecting the right location for your grocery retail store is a make-or-break decision. Generally, population density is the most important factor in making the right choice. The location must have between 500 and 1,000 people living within a one-mile radius. Impulse purchases hold a lump share of a grocery store sale. Try to establish your store in the residential area or nearby schools, parks, etc.
4. Create a Business Plan
A well-crafted business plan serves as a roadmap, outlining your goals, strategies, financial projections, and operational plans. Your business plan should cover aspects such as store layout, product assortment, pricing strategy, marketing and promotional activities, and staffing requirements. It is advised to hire a professional to draft your grocery store plan document.
5. Evaluate the Cost of Opening a Grocery Store
Generally, startup cost depends on the size of your store and inventory. Broadly, there are two types of costs involved in this business. One is fixed costs like procuring the store, the security deposit in case of rental space, computer, printer, weighing scale, and other infrastructure costs.
The working capital cost broadly includes inventories, staffing, and utilities. If you are starting with a small capital investment, then you must start with rental space. Starting the business from a rental location eliminates the huge cost of purchasing the space.
6. Arrange Fund
Depending on the size and scale of your grocery store, you will need to invest a reasonable amount of money. It includes store setup, inventory procurement, marketing, and working capital. If you are short in budget, explore funding options such as personal savings, loans from banks or financial institutions, partnerships, or seeking investment from potential stakeholders.
7. Grocery Store Registration & Licensing
The registration and licensing factors hugely depend on the location where you are starting the business. Sometimes, it varies from state to state also. Therefore, you must check the requirements for licensing and permissions for your specific store.
In India, you will need to have a Trade License from the local Municipal Authority to open a Kirana or a grocery shop. Additionally, you will need to apply for the license under the Shops & Establishment Act, and FSSAI License. Also, you need to have a GST registration number for getting tax benefits and avoid reverse taxation.
8. Setup The Store
Store design plays an important role in the overall success of this business. However, it depends on the size of your business. It is advisable to consult with an interior expert and craft a floor plan. Try to offer a comfortable environment and convenient shopping experience to your consumers
Decide whether you will offer self-service or over-the-counter service. Therefore, making an attractive and appealing store design is an absolute necessity. Try to place the products keeping in mind the convenience of the customers to see and reach them. Additionally, position products with the highest profit margins at eye level.
Additionally, you will need to have a computer, bill printing machine, weighing scale, etc. It is advisable to use GST-ready software for smooth accounting getting control of inventory.
9. Sourcing Inventory
Selecting the inventory of a grocery store depends largely on the target market and the location of the store. It is advisable to establish a strong business relationship with your vendors. If you plan to keep fresh foods, then have to be careful about the perishable nature of the items.
Additionally, make sure that you do not keep packed inventory for more than 20- 25 days. At the time of procuring processed foods and pharmaceutical items, check the expiry period.
Staffing plays an important role in this business. An employee of a grocery store should both be alert and trustworthy. The employees should be able to handle the crowd and cater to the customers with a smile even during rush hours. Additionally, they must have a thorough knowledge of the inventory.
It is advisable to hire people from the local community and provide primarily consumer-centric training and some functional training as well.
11. Grocery Store Promotion
Branding and advertising are a must in this business. However, you must advertise locally. Additionally, try to provide the best customer service to your consumers. Always keep in mind that a satisfied customer is the best advertiser.
Word-of-mouth campaign is the best way to get a good and consistent customer base. Additionally, you can consider giving advertisements in the local newspapers and TV channels for promoting your grocery store business.
Consider, creating an online shop for your grocery shop as more and more customers are looking to shop online.
12. Use Technology
It is essential to explore technology in your grocery store operations. It will not only boost efficiency but also drive growth. For example, you can add services like online ordering and home delivery services as more and more people are looking for doorstep food delivery services. Think of having a mobile app for your grocery store so that customers can directly select items and order from the comfort of their homes.
How much money do I need to open a grocery store in India?
In India, the average cost of opening a small grocery shop will be in the range of Rs 2 Lacs to Rs. 5 Lacs depending on the location and stocks. However, for starting a larger grocery shop, the investment can go up to Rs. 1 Cr. to 2 Cr.
What is the profit margin of the grocery shop business in India?
The profit margin varies with products. However, depending on the product, the profit margin for grocery items ranges from 2% to 15 %.
How can I attract customers to my grocery store?
There are various ways of attracting customers to your grocery store. It includes offering promotions, discounts, loyalty programs, and sponsoring or associating with local events. In addition, concentrate on providing the best possible customer service and a comfortable in-store ambiance.
Rupak is the founder of MUVSI. He is a small business consultant by profession. His mission is to make people know how to make money and understand personal finance for a better living.