Grocery Stores: Overcoming Challenges Affecting Profitability

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Grocery store owners have gradually learned to create clear points of differentiation; this step is important for establishing their prices and value based services. Most retailers have faced several challenges to maintain their cost and profitability, especially if the economy is in recession. Some of the challenges faced by grocery store owners are related to competitive markets, establishment of mega stores like Walmart and Target, recession, and fluctuating incomes of the general population.

Small grocery stores face some tough competition from rival companies with supermarket and store chains spread across the country. Store owners are finding it hard to cope with the tough competition from rival stores with better resources. The article reflects on the various challenges small grocery store owners face and how stores can overcome the challenges affecting their profitability.

The Plethora of Competitive Retail Mega Stores

Grocery stores in the same locality have been each other’s competition for a long time, but these small stores rarely pose a threat to the other’s profitability. However, it’s a completely different scenario when store chains pop up in the neighborhood to grab the attention of the same customers. On the other hand, customers are willing to go to stores because large store owners offer products at slightly cheaper prices. 

The larger department stores have an option to reduce their prices to give them a significant advantage over small to medium sized retailers. To overcome the challenge posed by large retailers, grocery store owners can target a specific niche and cater to that market.

For example, providing specialty items that large retailers fails to provide. Small retailers can carry items that a specific demographic finds appealing. This could help a small grocery store owner get back a significant market share.

Reduce Resources and Streamline Operations

Mom and pop grocery stores spend more resources than large retail stores which significantly reduces their profitability. To increase their profitability, small grocery store owners can get a chance to cut back on their expenses. Cutting expenses is possible by streamlining store operations; they can do so by hiring qualified employees.

Stores can overcome profitability challenges by merchandising the shelves and making shopping carts available for customers as they arrive at the store. They can invest in a cart system that requires shoppers to put in cash and the amount is refundable to those who puts the carts back. Such a system would streamline the process and use limited resources and human capital. 

The Cost of Labor

Grocery stores have a lower profit margin compared to large retail stores chains. To improve their profitability, grocery store owners must rely on different ways to reduce their operations. The cost of labor is one of the biggest expenses that grocery store owners have to cover. However, grocery stores can control their labor costs.

The cost cutting must not be so extensive as to hurt the daily operations of the store. For example, cutting labor costs to an extent that there’s no staff to clean up, arrange the shelves, or cater to the customers.

Training employees to perform their duties correctly can overcome labor costs. A fully trained employee will be able to handle their responsibilities better than untrained staff. Employees will be able to complete things quickly and efficiently.

Get Rid of Unproductive Processes

Unplanned processes are often counter-productive; grocery store owners need to get rid of any unproductive processes that do not add much to the profits. Perform an audit and see what products sell out slower than the rest. Removing these products from shelves will help get rid of the entire supply chain that costs the store more, bringing in much needed profits.

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