Top Cost-Management Strategies for Grocery Store Franchise
grocery store franchise already work on very thin margins so they need to cut their cost to make more money, one of the most important and critical factor is cost management for the success of grocery store franchise.
As these stores already lack in profit margins, even some inefficiencies can lead to significant losses.
Franchise owners should always focus on balancing operational quality by minimising unnecessary expenses.
Below are some of the best cost management techniques to help a grocery store franchise grow.
1. Efficient Inventory Management
Inventory is one of the biggest challenge faced by franchise owners as overstocking of perishable items can lead to wastage whereas under stocking can lead to dissatisfied customers and lack of sales.
Strategies
A. Implement Software
Use proper software systems that help you in maintaining stock and also has various inventory management tools.
A system like POS (point of sale) provides real time insights of all the stock which clears the head and saves from over ordering or under ordering.
B. Sales Trend
Analyse the sales trend of past years so that you know what items are sold in which season, always prefer to keep seasonal items which are in more demand and can be bought in bulk.
For eg – you can stock up festival items near the festivals and don’t order seasonal items at non season times.
C. Adopt Quick Methods
Always order the quantity that is required rather than ordering more or bulking specifically in perishable items as they can’t be consumed very fast.
D. Negotiate With Suppliers
Always have a strong relation with the supplier so that you get great payment terms, bulk discounts and time to time delivery.
Also Read: Best Practices or Opening A Grocery Store Franchise
2. Labour Cost
Labour is a very important aspect in grocery store franchise , poorly managed labour can lead to huge losses and fuss without any parallel productivity. Here are some tips to manage labour cost.
Strategies
A. Use Machinery – Use automated softwares, billing systems and self scanning machines to reduce dependency on human labour and save more money.
B. Train Employees – Train employees to do all the roles such as cashier, shelves or attending customers so that you have an option every time.
C. Create Preferred Schedules – You can use the work schedule planning software which analyses peak and off peak hours to align the staff and avoid overstaffing resulting in more savings.
D. Limit Overtime – Always limit the overtime hours by giving work to part time employees or other employees so that you don’t have to pay more.
3. Reduce Energy Consumption
Utility bills add to a lot in grocery store franchise P&L as they consume a significant amount of electricity due to 24 hour refrigeration, lighting, heating and cooling systems. So we must have something to resolve these problems.
Strategies
A. New Equipments – This is one time investment but gives long term gains, invest in energy efficient refrigerators , freezers and HVAC systems. Also go for the appliances that have high star rating , more the stars more the energy they save.
B. Use Led Lighting – Traditional bulbs are out now so only prefer led lights that are nice to appear and save a lot of energy.
C. Maintenance – Conduct routine checkups for HVAC systems and refrigerators so that you do not have to bear huge costs due to some leakages or small problems.
D. Store Layout – Arrange the food in such a way that there is no need to move things while picking one especially in the refrigerated sections.
4. Inventory Audit and Shrinkage Management
Regular inventory audits are very crucial for a business in order to manage the inventory stock level in the system as well as the counter.
Shrinkage is also a major concern in grocery store franchise especially in perishable goods.
By identifying the right causes we can find the best solution to this problem of shrinkage in franchise store.
We can implement corrective measures such as better stock control, FIFO, surveillance and employee training.
Benefits
A. It easily identifies inventory differences early, which leads to preventing huge losses.
B. Reduce shrinkage through better security and operational practices.
C. It enhances the accuracy of sales forecasting.
4. Relation with Supplier
COGS which is also known as cost of goods sold it always affects profitability , managing supplier relations can lead to lot of cost savings and better terms always bring opportunities.
Here are some tips to keep the relationship strong with the supplier.
Strategies
A. Limit Supplier – Always limit your suppliers that means opt less suppliers so that you can buy in bulk from few and get bulk discounts.
B. Negotiation – Renegotiate the contracts time to time for better pricing, payment terms and delivery.
C. Labelled Products – Introduce new products which are store branded and high quality which results in high margins leading to profitability.
D. Supplier Information- Have a check on the suppliers ledger after every few months in order to check the product quality, delivery times and pricing.
5. Technology
Technology is the future and investing in technology can literally replace human nowadays.
Improve your operational efficiency and reduce human errors by implementing technology which results in huge costs cutting in both long and short term.
Technology Solutions
A. POS Systems – These are known as point of sale systems and they come with special analytics which track sale patterns, customer preferences and inventory level enabling us to take decisions based on data.
B. Automated Restocking – You can use the software to alert you when the stock levels are low. It automatically notifies whenever any item is less in quantity or finished.
C. Digital Marketing – Use targeted marketing strategies that actually give results rather than expensive traditional marketing.
6. Control Wastage
Wastage and shrinkage ( inventory loss, mismanagement or spoilage) impacts in a sever way when we calculate profitability.
Efforts made on minimising the losses can help save some money.
Strategies
A. Waste Tracking System – Always have a look on the products that are getting wasted, while ordering new keep that in mind and adjust order quantities and storage place for the specific product.
B. FIFO (first in first out)- This method has been helpful since ages to avoid wastage as the item came first is sold first.
C. Discount Near Expiry Stock – The stock is going to let you down later so offer nice and attractive deals to fetch some money. Discounting always leads to quick and impulsive sales.
D. Better Storage Solutions – Use temperature controlled refrigerators to increase the shelf life of perishable products as they are most likely to get spoiled at room temperature.
7. Marketing Expenses
Marketing is one of the most important aspect of any business and the only thing one can rely on for footfall. Spending money recklessly on marketing can lead to drainage of resources.
A strategic approach can lead to maximisation of profit.
Strategies
A. Social Media – Use social media platforms such as twitter, instagram, facebook to promote your venture and fetch customers. Have some offers and discounts on new products.
B. Email Marketing- Fetch data and make a list of all the customers and send them an email relating to the discounts and offers, this requires no money and is effective.
C. Local Businesses – Collaborate with all the local businesses for cross promotional campaigns which increases visibility.
D. Loyalty Programs – Innovate your mind and introduce different loyalty cards or apps that benefits the customers who buy more and encourages repeat business.
Check out this: Grocery Franchise in India: A Comprehensive Overview
8. Maximum Space Utilisation
Always remember that you are paying rent for every square foot that is left empty, so have an organised approach and utilise all the space.
Having a uniform storage ensures you to get most value out of your work.
Cover the front desk areas with items that are cheap and could be bought impulsively.
Strategies
A. Software – Now you can use shelf optimisation softwares that enables you to utilise all the space and place the products at places where they are more likely to sell. It also increase the sales per square foot.
B. New Layout – You must place all the high margin items at eye level which grabs the attention and all the fast moving items at the back which results in impulse buying and benefits for the owner.
C. Multipurpose Display – Use all the modern equipments and modern shelving units that have much space and can accommodate different types of items.
D. Unused space – If you still have much space then offer it for rent to some bakery or coffee shop or have one of your own to have dual income.
9. Customer Retention
Building new customers is easy but its very expensive to retain the existing ones, Repeat customers not only provide repeat business but also spread our name with word of mouth.
Loyal customers bring a lot of new customers and always brag about the shop they shop from.
Strategies
A. Personalised Discounts – Track all the purchase history of the customers and offer some personalised discounts on high margin items which will make the customer feel more attached to the brand.
B. Customer Experience – Train all the employees to attend the customers calmly and gently, provide exceptional service and address their complaints promptly to make them trust you.
C. Reward Programs – Conduct loyalty programs for customers so that they have points or cashbacks to convert to money, this will encourage repeat purchases.
D. Engage Through Feedback – Never do delay in seeking customers feedback and address all their complaints promptly. Work on their complaints and read the suggestions box as it can sometimes help.
10. Operating Costs
Cost such as utility, cleaning and maintenance can get together quickly, regular monitoring helps in identifying areas where expenses can be cut and some money can be saved.
Operational cost is the cost that is used in day to day work, so cutting some of can give huge benefits.
Strategies
A. Review Bills – Always have a look at your bills monthly to check which prices have increased or decreased and also check whether you can find any hidden charges.
B. Outsourcing – Everything cannot be done on your own so use outsourcing in terms of cleaning, IT work, pest control etc.
C. Service Contracts – Renegotiate the contracts time to time in order to get better service, support and price.
D. Reduce Wastage – Minimise or nearly cut the usage of any type of plastic, paper or any other material for daily operations.
11. Franchise Fees and Miscellaneous
Franchise Fees, Royalty and other miscellaneous expenses can eat a lot of profit, for sustainable and feasible growth it is very important to manage these expenses.
Strategies
A. Understanding Agreements – Review the agreement till you find something for yourself, find loopholes and the areas where you can negotiate such as payment terms or renewal fees etc.
B. Training – Utilise all the powers given by the franchisor so that you minimise costly mistakes and even improve at operational level.
C. Franchisor Support – Basically take advantages of all the facilities provided by the franchisor marketing, technology and bulk purchasing support offered by the franchisor can lead to great relations in future.
Conclusion
These were some of the best tips one can follow while managing costs at a supermarket, implementing these will result in high sales and high savings leading the brand to new heights.
While maintaining a supermarket just keep all these steps in mind so that it is easy for you to avoid losses and wastage.
Customer will always be loyal to your venture if you will be loyal with the customer and keep offering them new schemes , some strategies even result in impulse buying which can be much profitable for long term.
With a proactive approach towards handling the business with the right tools, managing costs in grocery store franchise becomes a sustainable and effective practise for business growth.
Regularly monitoring the marketing, stock levels, item places and working on new innovative ideas can lead to a perfect business with great profits.
