The grocery store business is a lucrative investment. Suppose you are considering venturing into this field, open grocery store franchise right now. With the right grocery store franchise, you can start with fewer risks and loyal customers ready to shop from your store. If this sounds exciting, read on to find out the most profitable grocery stores in the country, what it takes to make a grocery store profitable, and the profit margin of a grocery store.
The Most Profitable Grocery Stores
The Kroger Co.
With its headquarters in Ohio, The Kruger Co. generated a profit of $60 billion U.S. dollars in 2018 by selling non-perishable goods. This made it the most profitable grocery store in 2018 worldwide. The company also saw an increase in revenue from its pharmacy and fuel segments.
Whole Foods
It’s easy to see why Whole Foods is one of the most profitable grocers. Their reputation for high-quality, minimally processed foods has earned them a strong brand name. They have built a loyal following with a focus on natural, organic foods. While the company must continue to invest in its facilities, its high pricing power has largely offset its costs.
H-E-B
When it comes to profits, H-E-B is one of the best. They are known for their brand name products; many locations are in Texas, Mexico, and the United States. Their central market store concept became famous in Austin, Texas, when they opened in 2018.
Its regional focus has given it an edge over its larger rivals. It holds the number one spot in 11 Texas markets and is a narrow No. 2 behind Walmart in three other markets. In addition to the geographic range, H-E-B has also improved its overall financial performance. In January, H-E-B was named one of the nation’s top grocery retailers, beating Trader Joe’s and Costco.
Stop & Shop
Despite the company’s recent troubles, Stop & Shop remains one of the most profitable grocery stores in the U.S. The company operates in over 200 countries, which is why the chain is considered one of the best. Besides offering groceries and other staple items, Stop & Shop also sells toys, hygiene products, greeting cards, video games, DVDs, and pharmacy items.
Fred Meyer
Fred Meyer is considered one of the most profitable grocery stores in the country. In the first quarter of 2011, it reported record sales and profits. The company’s net profit margin was 1.9 percent, exceeding the 1.6 percent earned by Winn-Dixie Stores, Lucky Stores, and Safeway. Fred Meyer has 79 locations across the U.S., with a market share of 30 percent. In addition to food, Fred Meyer also sells home improvement products, electronics, and exercise equipment.
Southeastern Grocers
In the third quarter of 2018, Southeastern Grocers, the parent company of Winn-Dixie and three other major supermarket chains, saw sales jump by 16.2%. Comparable-store sales increased by 21%. This reflects the recent pandemic that caused Americans to stay home and eat more food. Southeastern Grocers also recently opened four Winn-Dixie supermarkets in Florida, Georgia, and South Carolina.
How Do Grocery Stores Make Money?
Retailers used to rely on raising prices to compete for customers. But today, that strategy is no longer viable. If a grocery store can’t match a competitor’s price, it risks losing customers. Companies have turned to other profit-making methods to keep up with the competition. Here are some of them:
Membership Reward
One way to increase profits is by offering customers rewards or a membership. By doing this, stores collect data on what shoppers are buying. They then offer personalized offers to similar customers, reinforcing the benefits of a membership and opening wallets. Another way to increase profits is to build a base of loyal customers. Grocery stores rely heavily on these programs and members. In fact, in the United States alone, more than three billion people participate in reward programs.
Brand Deals
Brands can pay grocery stores for their space on shelves or display cases. This revenue stream can be significant. By charging brands for space, grocery stores can attract new customers and earn a higher profit. They can also charge for brand space in dedicated aisles and corners. It’s a win-win situation for the customer!
Selling Out of Season Products
Although consumers don’t have the option of returning goods, grocery stores make money by selling products that are no longer in season. Many manufacturers sell their off-season products directly to grocery stores, doubling the manufacturer’s profit. They don’t want to waste any product because it has expired. Shopkeepers can also pressure manufacturers to make their products available fresh. Keeping prices low is one way to increase profit margins.
Profit Margin of Grocery Stores
The profit margin of a grocery store can be high or low. In the United States, the average grocery store’s profit margin was 2.2 percent in 2017, but it varies greatly depending on the subclassification of the store. It is important to remember that the profit margin does not always reflect the total sales of a store, and it may not always be as high as it appears. In other words, grocery stores are profitable if they meet the basic needs of their customers.
