In order for a business to be successful, it is essential to develop a business model that describes how the business will generate revenue. As a basic concept, a business model provides information about a company’s target market and the needs of that market. It also provides information about the role that the company’s products or services will play in fulfilling those needs. An effective business model enables investors to gain insight into the operation of the company and identifies its competitive advantage. When we use the term business model it typically includes all the number crunching parts of the business. Let us discuss some of these terms which form the major part of the supermarket business model and try to understand them briefly.

  • CAPEX – In business, capital expenditures are the costs that organizations or corporations incur for the purchase, maintenance, or improvement of their fixed assets, interior cost, racking, cost budget for software and hardware, etc. 
  • Operating cost-  An operating expense is what a business spends on activities that aren’t directly related to its primary activity. They cover expenses associated with running the business such as salaries, rentals, and marketing costs in the case of eCommerce. It is advisable to thoroughly analyze these factors in order to operate with affordability.
  • Products – Choosing the categories of products may sound a daunting task. Analyze your competitor’s shelves, and always look for products that lacks in the market. Supermarket stores generally sell groceries, fresh produce, meat, bakery and dairy products, and non-food items as well. Always keep a balance between the variety of brands considering the reputation in the minds of customers as well as your margin.
  • ROI – The return on investment (ROI) is a performance measure used to evaluate an investment’s efficiency or profitability. It is better to plan before how you intend to recover your cost and further boost sales to generate better ROI. In supermarkets the margins are low so it is important to cut operating costs and opt for multiple sales channels and diversify your products for maintaining anoptimum ROI.
  • Breakeven Sales –  When sales equal expenses in a retail business, you have reached break-even. In a break-even situation, there is neither profit nor loss. Breaking even is the key to “cash flow” for a supermarket or any business. Marketing can play a crucial role in customer retention and getting new customer to reach your break even point.
  • Margins –  An item’s retail margin can be defined as the difference between the price at which you pay for it and the price at which you sell it. Due to slim profit margins, supermarket owners should plan and develop their business models accordingly. For instance, choose the right place with the right rentals or look for products that are not available at existing stores and there is a scope for demand.
  • Budgeting – A retail budgeting process is important not only for planning the purchases of merchandise in the proper quantities but also for estimating the costs associated with the business and the revenue required to cover them. As a starter it t is advisable to allocate a proper budget for every department associated with the supermarket business while keeping the idea of scalability in mind.

Entering the supermarket industry without a proper business model is like playing the game of darts in the dark. If you lack it you are sure to fail. While developing the plan make sure you have a business plan for at least five years and the sales projection for at least the next three years. Having a roadmap is always crucial in each and every business.

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Refer to more articles from series: 

?Click on the Link  [For Step 1 ] : Business Model Development:

?Click on the Link  [For Step 2 ] : Product Categories Finalization:

?Click on the Link  [For Step 3 ] : Organisation Structure:

?Click on the Link  [For Step 4 ] : Systems & Processes:

?Click on the Link  [For Step 5 ] : Layout Planning:

?Click on the Link  [For Step 6 ] : Software Implementation:

?Click on the Link  [For Step 7 ] : Process & Soft-skills training: