In this article, we explore the essential aspects of managing a grocery store in the UK business environment. We share key principles of profitability analysis that will help store owners understand how to optimize their businesses.
Every grocery store entrepreneur is well aware of the challenges associated with the rapidly changing market. Rising labor costs, fluctuating product prices, and higher business and energy expenses are just a few of the issues they face. Many of our clients note that although they have managed to maintain their sales levels comparable to the previous year, the profitability of their grocery business has significantly declined.
One of the key tools that can help small store owners improve business efficiency is profitability analysis. This is the process of evaluating how a store generates profits compared to the costs incurred. Whether you run an existing store or plan to open a new one, profitability analysis provides valuable insights that enable more informed business decisions.
In this article, we will conduct a simple analysis by comparing the results from the second quarter of 2023 with the same period in 2022. To do this effectively, we will rely on data from two key sources:
| 3-6.2023 | 3-6.2022 | ||||||
| Sales | Margin % | Margin £ | Sales | Margin % | Margin £ | ||
| Meat and Cold Cuts | £65 662 | 29% | £19 042 | £67 080 | 29% | £19 453 | |
| Dairy and Ready Meals | £43 670 | 39% | £17 031 | £44 612 | 39% | £17 399 | |
| Others | £25 445 | 11% | £2 797 | £25 995 | 11% | £2 857 | |
| Bread | £23 954 | 28% | £6 707 | £24 471 | 28% | £6 852 | |
| Vegetables | £23 335 | 34% | £7 934 | £23 838 | 34% | £8 105 | |
| Sweets | £22 637 | 23% | £5 207 | £23 126 | 23% | £5 319 | |
| Other countries | £17 684 | 64% | £11 257 | £18 066 | 64% | £11 500 | |
| Bulk Goods | £12 109 | 51% | £6 224 | £12 371 | 51% | £6 358 | |
| Beer | £10 957 | 45% | £4 980 | £11 194 | 45% | £5 088 | |
| Soft Drinks | £6 717 | 51% | £3 407 | £6 862 | 51% | £3 481 | |
| Salty Snacks | £5 890 | 51% | £3 000 | £6 017 | 51% | £3 065 | |
| Medications | £4 810 | 75% | £3 616 | £4 914 | 75% | £3 694 | |
| Spices | £3 373 | 58% | £1 953 | £3 446 | 58% | £1 995 | |
| Juices | £3 359 | 50% | £1 686 | £3 431 | 50% | £1 723 | |
| Teas and Coffees | £2 729 | 48% | £1 298 | £2 788 | 48% | £1 326 | |
| £272 332 | £96 139 | £278 211 | £98 215 | ||||
| Cost Type | 3-6.2023 | 3-6.2022 | |||
| Employees | £31 012 | 44% | £26 894 | 43% | |
| Rent | £21 775 | 31% | £19 823 | 32% | |
| Energy | £5 894 | 8% | £2 345 | 4% | |
| Marketing | £4 672 | 7% | £4 785 | 8% | |
| Waste Management | £1 244 | 2% | £1 250 | 2% | |
| Accounting | £1 500 | 2% | £1 500 | 2% | |
| Business Rates | £661 | 1% | £661 | 1% | |
| Fuel and Vehicle Costs | £1 045 | 1% | £989 | 2% | |
| Phones | £519 | 1% | £598 | 1% | |
| Repairs and Renovations | £643 | 1% | £244 | 0% | |
| Others | £2 120 | 3% | £2 801 | 5% | |
| £71 086 | 56% | £61 890 | 57% | ||
The problem becomes apparent when combining this data:
Margin – Costs:
Profitability analysis, based on consistent data from sales and accounting systems, provides a valuable insight into the business situation and should be a “must-have” for every store owner. It is important to consider how to improve store profitability without losing customers and to focus on cost management. In upcoming articles in our Knowledge Zone, we will explore simple and effective ways to achieve this goal.
This issue is truly significant. For several months, you may not notice that your store is incurring losses. This is because you are likely paying for goods via bank transfer with a payment term of 14 days or longer. Meanwhile, customers, by paying in cash or by card, transfer funds to your account within a maximum of 24 hours. This difference can create a situation where, despite the losses, you still have funds in your account, which might give the impression that everything is fine with the business.
In this article, we explore the essential aspects of managing a grocery store in the UK business environment. We share key principles of profitability analysis that will help store owners understand how to optimize their businesses. It is important to note that the success of a grocery store in the UK relies not only on offering high-quality products but also on consciously managing costs and profitability. We have analyzed the main cost categories and provided practical tips for their optimization.
Ultimately, understanding and controlling profitability are key factors in achieving success in the competitive grocery store market in the UK. With the knowledge gained from this article, you can manage your business more effectively and strive to increase profits and achieve lasting success.
Take advantage of a free consultation! Call us now and gain access to the data you need to continuously monitor the profitability of your business.
