Grocery Food Retail Outlet Business Strategies - Example

Business Plan: Grocery Food retail outlet Student Name Tutor Course Institution Date Table of Contents Table of Contents 2 Government Policy and Industry Dynamics 6 Property rights and liabilities 8 Emerging trends 8 Financial feasibility 9 Start up cost 9 Financial risks 9 Personal financial risk 9 Opportunity cost 10 Source of capital/financing 10 Human resource feasibility 11 Market Feasibility According to Commonwealth of Australia (2011), tthe retail industry has been one of the most important sectors of the Australian economy in providing the needed link between the producer and the consumer. The retail sector has allowed the consumers to have the ability to purchase commodities at user-friendly prices as well as quantities. The retail sector in Australia has been one of the most vibrant sectors since 2014 after witnessing a gradual decline for almost a decade. In the financial year of 2012-2013, the sector recorded a total of $69.7 billion regarding economic output, which was 4.9 percent of the gross value in Australia. In 2013-2014, the retail sector rerecorded more improved figures from the previous financial year. The improvement saw the retail sector contribute to an overall 8.9 percent of the total gross value. The percentage improvement implies that the sector recorded a 4 percent improvement in a period of one year. Research findings have confirmed that these figures have been declining for the past decade up to the year 2012-2013 (Lindy Crothers, 2012). Research on the Australia’s retail sector has established that the sector has over 133,375 retail business operations. The industry stands out as one of the largest in Australia regarding diversity and numbers. The diversity of the sector can be viewed regarding the premise business sizes, the existing models, a variety of products and the cost structures of businesses within the industry. Food retailing has accounted for an approximately 48 percent of the entire retail turnover in Australia, which is almost half the total, recorded by the retail industry (Small Business Competition and Consumer Protection Act: Your Rights and Responsibilities, 2012). The actual value estimate for the turnover recorded in the financial year 2013-2014 was $108.2 billion. However, the much of the turnover has been recorded from the supermarkets as well as the grocery stores. Further figures have also revealed that 19 percent of the total retail turnover can be attributed to Australia household sector. The graph below represents the proportions of retail turnover recorded in the Australian retail industry (2013-2014). The retail sector in Australia can be broken down into various segments regarding size and operations. The industry has various ranks that include sole-operators to well-established businesses, which have global recognition. For instance, there are large business firms that operate some outlets in the same industry where one sole operator operates a single outlet in the market (Whitehall Associates, 2004). Some of the known formats in which the industry operates in Australia include shopping centers, shopping malls, and warehouses. Regarding exit and entry into the market, the food retain industry has recorded significant figures in both areas. In the financial year of 2009-2010 running to 2012-2013, the sector recorded an average exit rate of 15 percent. On the other hand, the sector also recorded a significant but declining rate of entry in the industry. For instance, 17 percent entry rate was recorded in the financial year 2009-2010. Later in the financial year of 2012-2013, the same industry recorded an entry rate of 8 percent, which was a drop of 8 percent, previously recorded. The overall exit from June 2009 to June 2013 was recorded to be 4 percent. The Australian grocery retail sector has unique characteristics of slow growth rate regarding population. Therefore, the trend requires that the grocery sector have to ensure consistent delivery of products to the consumer. The grocery retail has been on a transformation spree, which is an important indicator for this business plan. The trends suggest that the market venture can turn out to be a lucrative investment if well handled from the point of inception to the several stages during development and growth. The aspect of customer intimacy has been on the rise forcing grocery retailers to make it a focal point in the retail sector. The consumer has been regarded as the major asset to any retailer as they are directly responsible for the success or failure of the business. The technological developments in the sector have specifically targeted to enhance the relationship between the customer and the retailers. For instance, the quality of service and products has been improving to meet the customer’s preference and satisfaction. According to Australian Retailers Association (2014), customers require clean and healthy food that is available at their convenient time. It implies that the groceries have to ensure their products remain fresh and in a clean environment al the time. Such a measure requires precise measurements regarding the amount or type of groceries sourced from the producers and the amount the consumer is willing and able to buy within a specified time. Such calculations and measurements are very necessary to ensure that no food goes stale. Technologies such as refrigeration and chemical free preservation option are recommended due to public health and safety concerns. The nature and trends of customer intimacy have been established to be more diverse and complex since many retail entities use strategic options to enhance customer intimacy. The best option to determine the technique to enhance customer intimacy is by understanding a specific area and using innovative approaches that would please customers. Some barriers are in place that prevents entry into the market, but such barriers are not rigid. The nature of the competition provides any entrepreneur with an option to take a risk and venture into the market. However, success is not 100 percent assured, as buyers are free to choose the sellers and services they prefer. One great challenge to entry is the fact that some retailers have already cemented intimacy with quite a good number of customers. The nature of the intimacy implies that any new entrant in the market will have an uphill task of convincing customers and progressing to establish intimacy with the same customers. It is hard for any new entrant to accurately predict progress regarding intimacy and numbers, given the fact that the market embraces direct competition. However, with adequate entrepreneurial skills, there the plan intends to delve so much into quality service to customers as a way to enhance intimacy as well as attract more customers. Government Policy and Industry Dynamics Since the grocery, the retail outlet is a sub-sector within the retail industry; the laws that govern the retail sector apply to the grocery sub-sector as well. There is a law articulated in the competition and consumer act 2010, which protect all the consumers in Australia. The act has been useful in protecting the local retailers from overseas forces. Penalty rates have also been established as a means to regulate the competitive environment in the retail sector. Despite the fact that regulations are meant to control the retail sector, it has been noted that the sector suffers from excess regulatory costs. Most of the regulations can be considered as necessary but the main argument presented is the multiple costs attached to the regulations. Some of the regulations cannot be justified on the grounds of the cost-benefit foundation. Some of the regulations have been considered as inconsistent, which might affect the business environment especially for new entrants struggling to gain stability. There are multiple regulators in the retail sector (Commonwealth of Australia, 2014). Technical Feasibility The Grocery retail sector is very competitive and requires a unique approach that will mark a difference between existing outlets and the new outlet. The first move will be to ensure that receipts are offered for every purchase made, as this will be helpful for both the customer and the firm. Eco-friendly packaging materials will be encouraged to ensure that the cleanliness of the environment is maintained. This will also reduce the incidences of environmental-related liabilities. An online advertisement strategy would be launched to take advantage of the abilities presented by social media. The system would ensure that both electronic and solid money apply to purchase. All licenses and permits needed to run the business would be acquired after extensive consultations with relevant grocery retail market regulators. The firm will sign a contract with a regular supplier who would act as a partial partner in the business. The supplier would only be entitled to the actual payment per unit as agreed and not to the profit obtained from the sales. The business requires skills in entrepreneurial management, food handling, and customer relations. These skills are relevant in ensuring that the grocery outlet operates within the required safety regulations and on safe business grounds. Property rights and liabilities The manager reserves ownership to the grocery firm name unless stated otherwise through a legal transfer. The management is also responsible for all liabilities related to its line of operation as far as food safety and quality is concerned. The grocery firm will be committed to ensuring that all environmental rules as far as waste management is concerned are adhered to. All liabilities and legal issues relating to the same will also be applicable as stipulated by the relevant regulatory authority. Emerging trends The business idea is well informed that the market is witnessing a new trend in the name of e-commerce and door-to-door delivery services. The new trend will be incorporated into the grocery business with time after all operations have commenced. Financial feasibility Start up cost The startup cost of the business is expected to be in a range of between $1500 and $2200 this includes the cost of leasing space and acquiring the various licenses needed to start up the business. It is estimated that $700 would remain to stock the outlet as well as establish a medium size refrigerator and receipt books. The funds would be sourced from personal savings and topped up with a soft business loan from a bank. Financial risks Some financial risks have the potential to affect the business in case they surface. The fact that the market has many players engaging in direct competition, there is a risk that the business may take the time to pick. The risk can be a real setback to the growth prospects of the grocery outlet. During the early stages of the business, there is uncertainty over the profit or losses to be made by the grocery outlet as some factors may be externally responsible for the outcome. Despite the potential risks, there are adequate indicators in place that the long-term benefits from the business have an enormous ability to surpass the risks. Personal financial risk Investing in the business would mean giving up the largest share of my personal savings to raise funds needed for the initial cost. It would also mean offering collateral to a bank to get a substantial amount to add up to the original cost. These two factors present a personal risk, which can prove to be more serious in case the business fails. Opportunity cost The market itself can present many opportunities especially after the business starts running. The research will be continuous to ensure that all opportunities that emerge are well utilized. Source of capital/financing Capital source Party responsible Amount invested Owner’s investment Personal savings $5500 Borrowing from family $5500 Loan from Bank Start up bank loan $11000 Total $2200 Initial start-up costs Item Estimated cost Rent (inclusive of security deposit) $200 Equipment $300 Leasehold improvement $200 License and permits $120 Opening and advertising $100 Utilities (telephone) $100 Payroll $200 Supply $200 Insurance $80 Total (initial start-up cost) $1500 Total capital $2200 Difference $700 Human resource feasibility As mentioned before, most retail outlets have 0-19 workers depending on the size of the outlet. The main entrepreneur will be the sole owner of the outlet and will hold patent rights to the business name unless changed or revoked through a legal process. All decisions and consultations for internal business operations will remain the role of the manager (entrepreneur). Financial funding, as well as outsourcing, remains the role of the manager who also retains the authority to hire and fire. Most of the business operations will be managed and implemented by the manager unless extra demand calls for more workforce. Given the fact that the grocery outlet will be launched in an already competitive market, caution will be taken to ensure that some products on the stock remain fresh and suitable for human consumption. The outlet will initially be of small size but is expected to experience growth in future. The inception stages of the grocery outlet will not have a permanent employee due to cost constraints. However, the grocery will occasionally hire casual but reliable labor when necessary to be paid on commission basis. Training will be necessary to ensure that the daily casual worker is conversant with aspects of quality as well as customer relations. Training on hygiene and customer friendly services would be mandatory for any casual worker. The remuneration of the casual workers would be in line with the labor laws of Australia. The Grocery Outlet will also comply with the occupational health and safety measure of the worker. Compliance with time-related rights will also be observed to operate within the regulatory framework provided by the market regulators. The grocery is open to growth but resistant to transfer of ownership in future. Grocery retail outlet is bound to realize growth by targeting customer centered services, which include quality, quantity, and convenience. Accurate measurement and friendly prices will be the main goal of the retail shop. After-sales service will be used as one of the strategies to convince customers to come back for better services. Receipts will be offered where customers will be allowed to keep receipts and use the receipts to earn bonuses as determined by the management. All bonuses will be calculated as part of the profit earned from the total sales. With enhanced growth, employees will be obtained on more friendly terms and offered free training on food handling techniques as well as customer relations. The growth in both size and outlet, as predicted, would see the grocery retail establish several outlets. This implies that a formal hierarchy would be developed with all employees reporting directly to the manager. Bibliography Australian Retailers Association., 2014, Competition Review 2014 . Retrieved from http://competitionpolicyreview.gov.au/files/2014/07/ARA.pdf Commonwealth of Australia., 2011, Economic Structure and Perforamnce of the Australian Retail Industry. Retrieved from Productivity Commission Inquiry Report: http://www.pc.gov.au/inquiries/completed/retail-industry/report/retail-industry.pdf Commonwealth of Australia., 2014, Relative Costs of Doing Business in Australia: Retail Trade. Retrieved from Productivity Commission Research Report: https://www.coles.com.au/~/media/files/coles/pdfs/industry%20reports/relative-costs-of-doing-business-in-australia_-retail-trade.pdf Lindy Crothers., 2012, Australia Retail Foods. Retrieved from Retail Food Sector Report: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Canberra_Australia_6-7-2012.pdf Australian Competition and Consumer Commission., 2012, Small Business Competition and Consumer Protection Act: Your Rights and Responsibilities. Retrieved from Australian Competition and Consumer Commission : https://www.accc.gov.au/system/files/Small%20Business%20and%20the%20Competition%20and%20Consumer%20Act.pdf Whitehall Associates., 2004, Price Determination in the Australian Food Industry. Retrieved from A Report: http://www.agriculture.gov.au/SiteCollectionDocuments/ag-food/publications/price-determin/food_pricing_report.pdf Appendix A Start-up Expenditures and Expenses Worksheet Item Total Cost Cash Required Land _200 Capital Equipment __________ $300__________ Computer __________ $100__________ ___________ __________ __________ ___________ __________ __________ Beginning Inventory _____$600_____ __________ Start up Supplies __________ __________ Licenses and Permits __________ $120__________ Leasehold Improvements __________ $200__________ Utility hookups & Installation __________ $1000__ __________ Insurance __________$80 __________ Other __________ $1600__________ _______________ __________ __________ Total Estimated One-Time Cash Requirements __________ __________ Start-up Operating Expenses Estimate No. of Months Total Cash Item Monthly Expense X Before Break even = Required Owners Salary __________ __________ __________ Employee’s salary, wages, benefits __________$150 __________ __________ Rent __________ __________ __________ Promotion expenses __________ __________ __________ Supplies and postage __________ __________ __________ Vehicle Expenses __________ __________ __________ Telephone __________ __________ __________ Travel __________ __________ __________ Interest __________ __________ __________ Maintenance __________ __________ __________ Other __________ $450__________ __________ ____________ __________ __________ __________ Total Cash Required to Cover Operating Expenses _________ Plus: Total One-Time Cash Requirements (Previous Table) __________ Add 10% Safety Factor __________ Total Cash Required for Start-up ____$600_____ Read More