Business Philosophy.
Our business philosophy is to operate the best mini grocery store where shopping and working is a pleasure and to provide real value to the customers. For achieving this we commit ourselves to the following ;
Description 3
We believe that if we sincerely follow these principles then we will be able toachieve very high growth in our business, earn fair profits and set the highest standards of excellence in our line of business.
Our mission is to be the best mini grocery store and delighting our customers by providing quality services at fair prices, maintaining the highest standards of hygiene and sanitation and also catering to the individual requirements of each customer. (Real Value Supermarket, n.d)
Retail Prices.
Retail prices for house hold goods will be fixed as per market rates. In respect of niche products the retail prices will be fixed at a level, whereby the investor gets a net margin of 3% on total Net sales Details of products and / or services to be provided. For details of niche products to be provided, please refer to K of Part IV. In addition the store will keep about 30 to 40 % of its shelf space reserved for day to day requirements of house Research 4 hold goods.
How many units of each product.
This information will be available only after the actual market survey is done.
The investor has more than a decade of experience, working in in super markets and convenience stores, covering all aspects of this line of business. Further he was highly regarded in the organisations, where he had worked earlier for his reliability, creativity, team work and his deep knowledge of computer software such as SAP.
Geographic and Demographic data:
Springfield, the proposed location, of the mini-grocery store, has a population of 167000. There are 35555 families and average size of a family is 2.84. There are 72027 households out of which 24236 are married couple households. The median age of the city is 32.8 years 18 % of the residents are under
the age of 18, 26 % are between 18 and 25 years of age, 44.5 % are between 26 and 64 years age 43.5 % and 14.5 % were more than 65 years of age. 48.5 % population of the city was male and 51.5 % female. The median income of a family was $ 33769. However as per the 2000 census Springfield Metropolitan area had a population of 680014 with a median family income of $ 52,551 and per capita income of $ 20633. Further the economy of the city is also based on health care. education and tourism. 3000000 visitors annually visit the city. As per the latest data available, total retail sales of the city exceeded $ 4.1 billion and $ 5.8 billion for Springfield MSA. Thus there is a good business opportunity for a micro grocery store in Spring Field,
Missouri in the niche food product segment for the tourists and other visitors. Population and Demographics for Springfield, Missouri in 2017.18 (2018) and Springfield Missouri Population 2018 (2018).
Questionnaire 6
The draft copy of questionnaires to circulated among prospective customers (after providing samples of the niche products) to the customers ;
1. What is your name, age and place of residence ?
2. How many days are you going to stay in Spring Field ?.
3. Is this your first visit to Spring Field ?
4. Will you come again ?
5. Did you like the taste of our products ? Do they have a unique taste ?
6. How much are you willing to pay for it ? (as per the list enclosed) ?
7. What should be waiting time for customers ?
8. What other products would you like the store to keep in stock ?
9. From where would you like us to source are raw materials for the food products ?
10. Are you satisfied with our hygiene and sanitation standards ?
11. Were the staff courteous and pleasant to talk to ?
12. Will you visit us again ?
For the inauguration ceremony the neighbourhood and passing tourists and other visitors should also be invited.
Market research is the first step in developing a market plan and helps in identifying who are
the potential customers, what is their age, lifestyle and income level.
i. Reviewing survey reports which have already been made public, covering similar lines of business.
ii. Collecting statistical data and details of buying trends from trade magazines and from libraries.
iii. Approaching local Trade Associations, Chamber of Commerce etc for collecting the aforesaid information (Sorensen n.d)
iv. Test marketing of niche products
Competition 8
Information on Direct Competitors.
i. To collect information on the marketing techniques of competitors and evaluating the merits and demerits of the same.
ii. Doing a SWOT analysis of competitors. (Sorensen n.d)
iii. Information on competition and demographics can also be obtained from Small
Business Development Center. (Flanagan, 2018)
Shopping malls, restaurants, bakery, candy, coffee shop and book stores located in the neighbourhood or where the tourists are likely to visit, are the indirect competitors.
Having regard to the Geographic and Demographic details of Spring Field City, tourists and other visitors are identified as main buyers.
It is proposed to take on rent premises in South Johnson street which is located in the commercial hub of Springfield city. Therefore this location will help in increasing the sales Location 9 of the niche products which are proposed to be sold by the store. The area proposed to be taken on lease by him would be 1,250 square feet. The store will be open 7 days in a week from 10.00 A.M to 10.00 P.M. Though the crime rate of Springfield city is one of the highest in U.S.A but since the proposed store will be located in the main commercial hub of the city it will always remain crowded with presence of adequate police force to maintain law and order. Pioneer Valley Transport Authority operates a large fleet of buses. So there is a good public transport system. Since Spring Field city has one of the highest density of population per square mile, therefore there is lack of adequate parking space especially in the business districts.(Grocery Store n.d)
On completion of market research, if it is found that there is a viable business plan then the next step would be to choose an appropriate business structure. A small grocery store can adopt any one of the undermentioned organisation structures ; Personnel 10 .
i. Sole Proprietorship.
ii. General Partnership.
iii. Limited Liability Partnership.
The investor initially would like to start on a small scale and would like to expand operations later. Further he has necessary funds to start the business from his own sources. If later on funds are required for expansion then he will consider for conversion to General or Limited Liability partnership. (Flanagan 2018)
Please see the organisation chart in the excel attachment enclosed separately.
Salary of a Store Manager in Missouri would be in the range of $ 54,500 to $ 55,000 (inclusive of all benefits and bonus). However there is a possibility of reduction in costs by hiring a lesser experienced and qualified person for this post. Salary.com (n.d) Store Keeper and Store Assistant’s salary may be estimated at 50 % of store manager’s Marketing 11 salary. As per the law of Missouri state, the weekly hours of work should not exceed 40 hours. Over Time is payable to the Retail Manager solely at the discretion of Proprietor. However it would be unfair to expect the stores manager to work 12 hours a day for 7 days in a week. Therefore the Proprietor can relieve the store manager from time to time to reduce costs at the initial stages. Over Time is payable to the Store Keeper and Assistants at 1.5 times the normal rates. The assistants should work in shifts and should also discharge the responsibilities of the store keeper during his absence. Annual leave, Sick leave and leave on National holidays also have to be given to the staff. (Office of Administration, Division of Personnel n.d) Hiring of staff can be done by placing advertisements in a local news paper and interviewing the short listed candidates.
It has been observed that there will always be a demand from individual retail customers for Pricing 12 speciality foods or other items that are not available at neighbour supermarkets, which keep only standard products. A mini grocery store can take advantage of this situation for catering to such niche markets by stocking these items. For instance Cal-Mart, a family owned small grocery store in San Francisco has built up a loyal customer base by procuring fresh materials from local sources and by providing quality sandwiches made to order. Similar items which can be stocked and which are not available at supermarkets are ethnic food, organic food, vegan food, gluten free foods, premade foods, freshly made hamburgers and ice cream, fresh coffee and juices, fresh doughnut and bagels, fresh sushi etc. (Flanagan 2018)
i. Proposed Mark up to cost. It is calculated by the following formula : Cost of Goods / Gross Margin * 100 Where Gross Margin is Net Sales – Cost of Goods Sold. Applying the aforesaid formula, the Mark Up % works out to 28.21 %. Please refer to the Business Plan sheet in the separate excel file.
Pricing 13 Though the selling prices of niche products are higher, stores is advised to follow “ penetration pricing policy “ so as to first get entry into the market. Subsequently it can increase the prices of niche products as per market rates. (Berry 2008) has estimated the material costs of a Grocery store at 86.89 %. Material Costs of a coffee shop is 15 %. The material costs of Niche Products are similar to that of coffee shops (Material costs of a coffee shop n.d) However if the Grocer is selling speciality products his gross margin will be much higher. For the purposes of ensuring that the investor gets a return of 3 % on net sales the material costs have been reduced by only 8.89 %.
ii. Any introductory discount. Introductory discount of 2.50 % is recommended..
iii. Profits through volume or prestige product. Margin of profits of Supermarkets is very less; varying between 1% to 3%. They make up for this thin margin by huge volume of business. Reverse is the case of a
Promotion 14 mini – grocery store selling niche products having low volumes. (Huebsch n.d) The average Grocer’s sales margin is around 2 to 3 %. (Reagan C. 2013) However as mentioned earlier the stores should keep its prices low in the initial stages even for its niche products. For fulfilling this objective in the business plan also we have kept the net margin at 3 % only.
i. Personal promotion.
Promoter meeting personally all his friends, relatives, persons in the neighbourhood where he stays and also where the store will be opened.
ii. Non Personal Promotion.
Finance 15
Complete details given in I (Part II)
Distribution Plan
Since it is a small retail business sales will be made directly to the actual consumer and there will be no other channel.
Gross Margin
|
Particulars |
Amount ($) |
|
|
Net Sales |
100.00 |
|
|
Less : Cost of Goods Sold |
78.00 |
|
|
Gross Margin |
22.00 |
Mark up to cost is 28.21 % |
Operating Expenditure
Finance 16
|
Particulars |
Amount $ |
|
|
Gross Margin |
28.21 |
|
|
Less : |
||
|
Employee Costs |
8.00 |
|
|
Rent |
3.00 |
|
|
Insurance |
1.00 |
|
|
Sales Tax |
0 |
It is assumed that the same is being charged separately from the customers and the amount collected is deposited with the government. Hence tax amount not included in the statement of operating Margin. |
|
Advertising and Publicity |
5.00 |
Includes 2.50 % as introductory discount. |
|
Other establishment costs including depreciation. |
2.00 |
|
|
Total operating expenses |
19.00 |
|
|
Net Margin |
3.00 |
The employee costs of a retail stores varies between 10 % to 20 %. But since it is a small stores we have taken it as 10 % and further reduced it to 8 % since it is assumed that for keeping employee costs low the proprietor would share the work load of employees. (What % of a business revenue should be for salary, n.d)
Assumptions 17
The use of automatic teller and vending machines can also be explore to further reduce employee costs. (Quelch J. and Cannon K. 2018) Rent is estimated at 3 % of Net Sales. (Wroblewski, 2018). In Canada, the rental costs is around 4.4 % and Marketing costs is around 1.4 %. (How to control costs in retail business, n.d) Since it will be a small store occupying around 1250 square feet of space and furniture fittings and other office equipments will also be a bare minimum therefore energy consumption costs and depreciation is estimated to be around 2 % of net sales.
The following equipment will be required in setting up a mini grocery store.
i. Cash register with credit card processing machine.
ii. Refrigerators.
iii. Shelves and display cases
iv. Carts and baskets for the use of customers.
(Flanagan 2018)
Sales tax rates in Missouri is 1.225 %. However it has not been shown as an expense since assumed that it is separately recovered from the customer.
Reference list
Berry T. (2008), Demographics, retrieved on 05/07/18 from https://www.entrepreneur.com/answer/221767 accessed on 06/07/18
Flanagan. M.(2018), , How to start up a Mini-Grocery Store, available at https://smallbusiness.chron.com/start-up-minigrocery-store-11889.html, accessed on 05/07/18
Grocery Store (n.d) retrieved on 06/07/18 from https://www.referenceforbusiness.com/business-plans/Business-Plans-Volume-09/Grocery-Store.html
How to control costs in retail business,(n.d) Business Development Bank of Canada, retrieved on 09/07/18 from https://www.bdc.ca/en/articles-tools/money-finance/manage-finances/pages/standard-costs-retail-industry.aspx
Huebsch R. (n.d) what is the profit margin of a super market available at https://smallbusiness.chron.com/profit-margin-supermarket-22467.html accessed on 05/07/18.
Material Costs of coffee shop, n.d. retrieved on 09/07/18 from https://www.google.co.in/search?q=MATERIAL+COSTS+OF+COFFEE+SHOP&oq=MATERIAL+COSTS+OF+COFFEE+SHOP&aqs=chrome..69i57.16797j0j7&sourceid=chrome&ie=UTF-8
Office of Administration, Division of Personnel (n.d) available at https://oa.mo.gov/personnel/state-employees/hours-work-overtime-and-holidays on accessed on 06/07.18.
Population Demographics for Springfield, Missouri in 2017, 2018 (2018) retrieved on 09/07/18 from https://suburbanstats.org/population/missouri/how-many-people-live-in-springfield
Quelch J.and Cannon K. (2018) 2018 Top trends in budgeting, planning and forecasting, Better Marketing at the Point of Purchase, Harvard Business Review from November 1983 issue, retrieved on 09/07/18 from https://hbr.org/1983/11/better-marketing-at-the-point-of-purchase
Real Value Supermarket, (n.d) available at https://www.realvalueiga.com/sample-page/ accessed on 06/07/18.
Reagan C. (2013 June 6), What’s behind the rush into low margin grocery business, CNBC retrieved on 09/07/18 from https://www.cnbc.com/id/100794988
Salary.com (n.d) retrieved on 06/07/18 from https://www1.salary.com/MO/Retail-Store-Manager-Salary.html
Sorensen K, (n.d) Tips to effective marketing for start- ups, Business Dictionary, retrieved on 05/07/18 from https://www.businessdictionary.com/article/412/tips-to-effective-marketing-for-start-ups.
Springfield Missouri Population 2018 (2018) World population review retrieved on 09/07/18 from https://worldpopulationreview.com/us-cities/springfield-population/
What % of a business revenue should be for salary (n.d) retrieved on 09/07/18 from https://www.google.co.in/search?q=What+percentage+of+a+company%27s+revenue+should+go+to+salaries%3F&sa=X&ved=0ahUKEwi76OH374rcAhWIQY8KHbRNBhQQzmcIQQ&biw=1242&bih=602
Wroblewski, M.T. (2018. May 15) retrieved on 08/07/18 from https://yourbusiness.azcentral.com/percentage-rent-should-pay-according-businesses-gross-income-29134.html on 06/07/18
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