How to open a small grocery store

Discover what it takes to set up shop as a local grocer.

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Launching a small grocery shop can be a fulfilling and rewarding endeavour, but there are a range of factors to consider before you begin. From the skills and the equipment to the mandatory licences, this guide will demystify the process for you.

What is a grocery store business?

A grocery store business is a food seller that typically operates in a city where there is less competition from nearby supermarkets. A grocery shop sells groceries, drinks or specialty ingredients that aren't available locally.

small grocery store owner

Writing a business plan

There are no prerequisites for starting a small grocery shop. However, writing a business plan can help you get off to a successful start.

Here are some of the key aspects to consider when writing your plan:

  • Location. This is key for grocery stores. Will you open near a residential area, a school or offices? If you open in an office area, you might receive a lot of traffic during the week from 7am to 6pm. However, it may be fairly quiet over weekends. Ask yourself, how will this affect how much money comes in?
  • Target market. Decide on what demographic you are targeting. Who is the ideal customer? This will depend on your location. For example, maybe there are plenty of environmentally conscious locals in your area and you decide to open an organic-only store.
  • Costs. Be clear on both the initial fixed costs and the running costs of your new business. What equipment will you need? How many employees do you plan to hire?
  • Brand identity. Creating a consistent look for your store can help promote confidence in your business's brand. Will you work with a graphic designer to create a logo and other aspects of your brand identity?
  • Niche. Identifying and targeting a niche customer base can be lucrative. How can you stand out from the competition?
  • Marketing strategy. Marketing and attracting new customers will be vital to the financial health of the business. Create a marketing strategy and decide how you will grow sales. For example, you may decide to focus some of your efforts on digital marketing via social media or search engines.

Get the right qualifications

Trained workers that your grocery store might need include:

  • Food Safety Supervisor (FSS). You need at least one if your business involves selling food items to customers. A worker can become a supervisor by taking one of the government courses outlined below.
  • Employees trained in food safety. Any worker dealing with food or food equipment needs training.

There are also government courses available for anyone interested in retail operations and management. These courses cover essential knowledge for running a grocery store. The courses available include:

  • Certificate III in Retail. This course covers everything from customer service to daily store operations. The average course fee is $2,063 and takes around 12 months to complete.
  • Certificate IV in Retail Management. This course covers the skills required to manage a retail store, including handling food safety standards, how to recruit staff and managing inventory. The average course fee is $3,080 and takes around 12-18 months to complete. Students must have completed Certificate III in Retail or have relevant industry experience.
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    Buy the right equipment and software

    Before you begin, you'll need to invest in equipment and software. Essential equipment might include:

    • Store shelving
    • Shopping baskets or carts
    • Aisle signage

    Good software not only helps you grow the business, it can also save many headaches when it's time to count stock or file tax returns. Software to consider:

    Choose a business structure

    To start your business, you will need to decide on a business structure. There are three common types in Australia:

    • Sole Trader. A Sole Trader is a one-person business. Sole Traders have full control over their business, as they don't have business partners, investors or employees.
    • Partnership. A Partnership is when two or more people start a business. In a Partnership, everything from the income to the debt, and even legal liability, is shared equally between partners.
    • Company. A Company is its own independent legal entity from the business directors. Ownership of a Company is based on shareholders. Setting up a Company protects the director's personal assets from legal liability, unlike a Sole Trader or Partnership setup.

    Deciding on a business structure is only the first step. To start a company in Australia, you need to register for an Australian Business Number (ABN). You'll also need to register a business name and open a business bank account.

    Get the right licences

    There are several licence hurdles to pass before launching your grocery business. Different councils across Australia require different licences and, depending on the food and drink products you are selling, you may be required to get the following:

    • Food licence
    • Meat licence
    • Tobacco and alcohol licence
    • Fuel licence
    • Medicine licence
    • Music licence, if you plan on playing copyright music in the store

    Business.gov.au can provide you with a list of licences you'll need in your specific area.

    Visit the Australian Institute of Food Safety for more resources and information about food safety standards across Australia. Alternatively, if you need any legal help or guidance you can compare online legal services below.

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    How to finance your grocery business

    From covering rent to furnishing your store and buying inventory, starting a grocery business can require high initial investments. However, with the right financing, these investments can seem a little less daunting. You can make the most of different loans available, including:

    You can read more about supermarket loans in our guide.

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    Frequently asked questions

    How profitable is a small grocery business?

    This depends on a variety of factors, such as the location or the types of products sold. Generally speaking according to research, retailers might expect to make 0.5% to 4.5% net profit.

    What are the most profitable items in a grocery store?

    The most profitable items in a grocery store typically include:

    • Non-grocery products. Items such as light bulbs, batteries or a coffee plunger may have a profit of around 40 to 50%.
    • Prepared food. Prepared meals or pre-cut vegetables may enjoy a profit of about 40%.
    • Organic produce. Organic fruit and vegetables may be marked up by as much as 30 to 50%.

    What are the costs involved in opening a grocery business?

    Some of the costs involved in opening include:

    The initial investment can vary a lot, as there are so many factors at play. Generally, you might have to pay anywhere between $30,000 to $70,000 for a small grocery business.

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