How to Start a Grocery Store Business in India

Grocery stores in India aren’t a rare sight. They are a thriving business in India and can be quite profitable if done with careful planning and execution.

In India, the growing population and urbanisation have led to an increase in disposable income and consumer spending. Cosmopolitan culture has given rise to changing lifestyles and food preferences. E-commerce and online grocery shopping have experienced a boom and are increasing the demand for convenience. The urban population is also displaying an increased focus on health and wellness, and sustainably sourced products.

These factors drive the growth and evolution of grocery store businesses in India, making it an attractive market for entrepreneurs and investors.

Grocery Stores in India: Revival of the Industry

The grocery store industry is experiencing a revival in India, fueled by consumer preferences, technological advancements, and new business models. Modern retail formats like supermarkets and hypermarkets are hugely popular, offering a wide range of products and a convenient experience. Online grocery stores are also gathering traction with the rise of e-commerce platforms. Further, the traditional kirana stores are adapting to modern needs, embracing digital payments. These factors are increasing demand for quality and convenience in grocery shopping.

With the grocery store industry almost reaching saturation, one of the strategies to ensure a successful business is how you differentiate from competitors. There is an increasing preference for organic, sustainable, and locally sourced products. Catering to this is a great way to set yourself up as a responsible and local-friendly business.

The Rise of Grocery Stores in India

In the earlier days, farmers used to sell their produce in the market on a particular day of the week. They used to sell spices, vegetables, fruits, grains, and staples.

However, with urbanisation and changes in lifestyle, new forms of trading emerged. This led to the rise of grocery stores, where people could easily access and buy groceries at their convenience. The physical stores have also given way to online grocery stores, which can deliver groceries to customers’ doorsteps.

How to Start a Grocery Store Business

Starting a grocery store in India requires extensive research, careful planning, and execution. A sound grocery store business plan is crucial. Let’s take a look at the key steps involved in starting a grocery store:

Choosing the Right Location

To choose the right location, consider factors like considerable foot traffic, demographics, competitors, and accessibility. An ideal location would have the following aspects:

• High visibility and parking availability
• Proximity to residential areas, offices, or public transport hubs
• Limited competition nearby
• Easy access for suppliers and logistics
• Compliance with local zoning and regulations
• Affordable and flexible in terms of lease or ownership.

A well-chosen location can attract a loyal customer base, drive sales, and ensure long-term viability. Conducting thorough market research is the best course of action before deciding on the location.

Compliance and Other Formalities

Before starting a grocery store, it's essential to secure the necessary licences and permits to comply with regulations.

Register your store under the Shop and Establishment Act with the state government. Obtain a food safety licence from the Food Safety and Standards Authority of India (FSSAI) to ensure your food products meet safety standards. You must also register for Goods and Services Tax (GST) and acquire a Tax Deduction and Collection Account Number (TAN).

A fire safety certificate from the state fire department is also required to adhere to fire safety norms. Additionally, you have to ensure compliance with labour laws regarding minimum wage and employee benefits. You’ll also need a health and sanitation certificate from the local health department.

It’s crucial to regularly update and renew these licences to avoid penalties and maintain smooth operations in your grocery business.

Rent, Buy or Lease the Space

Whether to buy or lease a space for your grocery store depends on various factors such as the risk profile of the owner of the business and the available capital.

A business such as a grocery store in India has many expenses and may not be profitable for a few years. Buying land or building for the business outright before the business has proved profitable might land you in a financially unhealthy situation.

Renting is the cheapest option, but more suited for short-term businesses or pilot projects. It is a good idea to enter into a formal agreement with the owner of the property after negotiating terms that are favourable for you and keep renewing the contract as it ends.

Leasing seems to be the most favourable option as it avoids larger commitment of funds and steers you away from pitfalls, it also does not require monthly payments which could be a pain point for many businesses.

Networking

Networking is an important aspect of running a grocery store business in India. Connecting with various industry players can help your business in the long run. You can network with:

• Suppliers and distributors for best prices and products
• Local farmers for fresh produce
• Food manufacturers for private labels
• Industry associations for updates and support
• Other retailers for knowledge sharing and collaborations
• Local community for customer engagement and loyalty

Building genuine relationships can drive growth and success for your business.

Managing Inventory and Pricing

An effective grocery store setup, inventory management, and pricing strategies are vital for a grocery business in India. Implementing a system can be useful for the smooth operation of the business.

• Inventory management techniques help minimise waste and reduce costs
• Accurate demand forecasting to ensure stock availability
• Regular stock audits and cycle counts to prevent theft and pilferage
• Competitive pricing strategies, considering local market dynamics
• Dynamic pricing of perishable items to minimise losses
• Clear labeling and signage for easy price comparisons
• Regular price reviews to stay competitive as well as profitable
• Technology solutions like inventory management software for streamlined operations

How a Business Loan can Help you Start a Grocery Store Business in India

A business loan can be a crucial step in starting your grocery store in India. It provides the necessary funds for purchasing inventory, securing a location, and covering initial operational costs. With a reliable financing partner, you can manage cash flow effectively and invest in marketing to attract customers. Additionally, a loan can help you seize opportunities for expansion as your business grows.

Conclusion

A grocery store business in India has good potential, thanks to increasing consumer demand and modern retail trends. Success depends on factors such as thorough planning and solid execution in areas such as inventory control and financial management. An unsecured business loan of up to INR 75 lakhs* from SMFG India Credit can offer the financial support needed to grow your business. Please keep in mind that one of our eligibility criteria is that your business must have been operating for at least three years.