The Supermarkets and Grocery Stores industrymakes up the largest food retail channel in the US. As per the latest figures released by National Grocers Association, nationally there are 21,000 privately held or family–owned grocery stores in the US that generates $131 billion in annual sales. These grocery stores account for total 25% of the Supermarket industry sales in the US.
As per the “2016 Independent Grocers Financial Survey” conducted by the National Grocers Association, the sales of the independent grocers grew by 2.1 percent in 2015 which is up from 1.5 percent in 2014. In order to ensure that the growth story remains intact, the grocers need to ensure implementation of robust financial management practices for their business that includes accurate processing of their financial information, efficient tracking of inventory and POS data as well as adherence to underlying regulatory information on a year-on-year basis.
However, the industry operators are faced with numerous challenges – Competition from superstores, changing demographics, and the pressure to keep up with ever-evolving technology are unavoidable realities of the independent retail grocery marketplace.
With 2017 fast approaching, Quatrro takes a look at the Top-5 challenges that grocers will need to overcome in the year ahead.
1. Lack of access to accurate, timely financial information
Running a grocery store can be challenging with a constant need to access more relevant financial and operational information about the business. With increased competition from superstores, the grocery operators are required to provision for high-level strategic analysis of the sales and margins by store department. This requires access to not only experienced accountants but also best-in-breed technology including business intelligence and analytics. Most of the small business owners have access to neither the resources nor the technology to address these concerns.
2. Escalating Labor Costs
Controlling operational costs is certainly one of the biggest challenges that any grocer faces. Since grocery stores typically run on extremely low profit margins, the need for a lean and efficient operation is critical. Labor costs are the single greatest controllable expense. Some grocery store managers have a tendency to cut labor during tough times. If labor cost reduction is not managed properly, customer service and store conditions may suffer. This, of course, results in lost customers and sales. Retailers that do not properly budget for necessary training programs will most likely see both increased employee turnover, which becomes very costly over time, as well as reduced customer service, due to a lack of training.
3. Low Profit Margins
Grocery stores operate with extremely low margins and rely on improving sales volume to generate profits. Profit margins can be razor-thin: in some cases, a grocery store’s net profit is less than a penny per dollar of retail sales. Moreover, competition limits a company’s ability to raise prices. As a result, Grocers struggle to survive due to a combination of intense price competition and low margins in the grocery retailing industry and are looking for the cost-effective ways to improve their business profitability.
4. Managing Cash Flows
In today’s business environment, the grocery owners need to effectively manage the cash flows to improve their store’s profitability. Effective monitoring & tracking business cash flows helps the grocery operators to expand capacity, increase inventory, extend their product lines and penetrate new markets. However, tracking the cash flows is extremely challenging for the grocers as it requires access to high quality financial reports and business intelligence dashboards.
5. Issues In Existing Store Systems Technology
Generally speaking, most grocery store retailers have added technology at a conservative pace over the years, mainly due to precise ROI requirements. It is an industry that runs on very low profit margins. New solutions need to demonstrate quick payback through increased sales and profits, and/or reduced costs to the operation. Technologies designed to improve the customer’s experience in the grocery store, such as faster checkout, or ways to provide additional information to the customer are sometimes difficult to justify when chains are focused on their bottom line. The impact of new system deployment, training, maintenance, and support can add to a retailer’s reluctance to simply accept the next new technology.
As technology has evolved over the years, most retailers have switched their operations to the latest tools and techniques except using older systems. Few drawbacks of existing technologies are given below:
- Many systems either do not connect, or are connected in a cumbersome manner that requires manual processes. Information is difficult to retrieve, and new releases are resource-intensive to manage
- Some softwares purchased through vendors lack consistency in capability, have overlapping scopes, and are rarely integrated in terms of function or data
- Many older applications are based on outdated architecture and are inflexible, making it difficult to change processes and business rules, add new devices, and so on, without touching the source code. This can present a competitive disadvantage for retailers as new innovations are made available over time
- Older hardware is difficult and costly to maintain. IT departments have grown in size as technology has been deployed over the years
- According to several studies of IT leaders, as much as 70 percent of a retailer’s information technology resources are devoted to sustaining and running existing capability, leaving only 30 percent for exploring and implementing new capabilities
The past was challenging for small and few of the big grocery stores, and the near future won’t be much easier. Differentiation was, and will be, key for retailers in upcoming years. Grocery stores need to increase focus on maintaining accurate financials, maintain sufficient cashflows and access to best-in-breed technology that has the following modules built-in:
- Optimized Scheduling
- Time and Attendance
- Employee Self Service
- Inventory control with Purchasing and Receiving
- Employee Management
- Extensive Reporting
- Daily, weekly, monthly, and yearly sales
- Business Intelligence and Analytics Reports
- Monitor cash registers, and in depth Cashier Analysis
Hence, with the above challenges faced by grocery operators today, grocers need someone who truly understands the retail industry needs and challenges, someone who is not just a technology expert but an industry expert and who can translate these challenges to opportunities to help you to grow your business. This makes it critical, more than ever, that grocers turn to trusted service providers with deep-domain expertise to manage their financials and turn these challenges into opportunities. Quatrro specializes in providing cost effective finance & accounting solutions to the grocery industry.
Today, over 400 grocers throughout the US are leveraging Quatrro’s robust and advanced accounting platforms to improve business profitability. With over 24 years of grocery industry experience, Quatrro ensures that our clients achieve their strategic goals while improving their bottom line and cash flows. That’s why so many grocers look up to us as a valued partner and resource for advice, insights, ideas and solutions to their unique challenges.
If you are running a grocery store and want to experience similar benefits and more, please contact us