Each supermarket location for supermarket franchise has its own pros and cons. To Know about it read below.
When we think about setting a business, the first thing that comes in our mind is location, while searching for the location we have to evaluate the advantages and disadvantages of the location.
Eventually the location for supermarket franchise is going to affect the day to day running of the business as the operational cost, customer base, foot traffic and competition.
Each and every location comes with its own challenges and outcomes, so making a decision while looking at all the factors is a must so that no risk is taken.
Whatever the decision is, it should always align with the motto of your brand, market, financial resources and future goals.
Below we explain in brief the pros and cons of different location for supermarket franchise and provide a detailed look at the key points to consider for each type of area.
Also read: How to select best locations for your supermarket franchise?
1. Rural Areas
These areas are generally characterised by smaller populations and poor people and these areas are far away from commercial and residential development.
The only things these areas offer are lower maintenance cost and lower competition but it is difficult to promote supermarket products in rural areas as those people do not prefer packaged foods.
Pros
Less Competition
You may open in a nice rural area and dominate the market as there is very less or no competition and you can bring various new items that are in demand, in this way you can make a successful business from a rural area.
Community Focus
The staff can communicate with the local people so that they get to know the local culture more as word of mouth is the biggest advertisement if the locals support the brand, it is very good for the business in future.
Supermarkets that build strong relations with their customers tend to gain loyal customers and assured revenue.
Low Operational Cost for Location for Supermarket Franchise
One of the priority advantages of rural areas are the land and the property cost and tax which is certainly less as compared to urban or sub urban areas which helps in making more profits even in less sales.
These lowers costs can help in increasing the profits especially for the owners with limited capital
Cons
Economic Vulnerability
It can be a huge risk to open a supermarket in rural area as the income scarcity has always haunted these areas and if the people tend to loose job their purchasing power reduces which can be a huge loss for the owner.
This could also result in people asking to reduce price or the owner to himself put discounts in order to sell before expiry.
Low Foot Fall
Rural areas have a smaller customer base as the prices in the supermarkets are a bit higher.
Impulse purchase is very difficult in such case as most the people are going to plan and come to the supermarket so they do not get the random visit which adds an additional benefit to their sales.
Limited Product Cart
Rural areas generally face challenges in sourcing wide range in groceries as the transportation cost is much higher and the demand is not enough to make up for the product to enter the rural market.
Generally products which are available are the best suited for the local people and their preferences are only available in the markets.
Limited supply of some products can lead to increase in prices.
2. Urban Areas
Urban areas or locations for supermarhrefer to the places where opening a supermarket is a dream come true as the foot fall is also at its peak and the surroundings are full of people which benefits the business. These are generally the densely populated areas of the city.
Pros
High Foot Fall
Urban areas are home for a large number of people in our society which results in immense foot fall and massive crowds which even has the paying capacity.
With dense neighbourhoods, commercial buildings, office centers, supermarkets in these areas benefit from higher footfall and higher customer base to earn more profits.
Easy Labour
All the recruitment challenges are handled by the location for supermarket franchise itself as urban areas have all types of workers available for part time, full time, or freelancing jobs.
As the area is full of people, it is easy to find people with retail experience and one can hear them accordingly.
Sales Volume
Urban areas are full of people so you can always expect customers as the demand for new products is always higher in urban areas and the footfall is much higher which attracts a lot of customers.
With a lot of people working and living nearby there are a lot of chances for repeat customers specifically in tight residential areas.
Cons
Intense Competition
Urban areas are often full of large chains or established businesses who have all the local customers so it is very difficult to compete in such a tremendous sector.
The cost of marketing to stand out higher than others and look out, the amount needed is much higher than expected.
In cases like these it is very difficult to come and establish a supermarket brand.
Limited Space
Real estate in cities is mostly limited so one may get a smaller shop because urban areas is expensive than rural and suburban areas, this will automatically result in the reduction of variety at the supermarket due to space issues and one can also loose a particular customer base due to lack of products at an area where already competition is very high.
Limited space can also lead you to a trap and make you buy more inventory in order to prevent the other expenses.
High Real Estate Cost
One of the most difficult things to manage is the rent as the rent in urban areas, specifically in popular streets the rents and the prices are unaffordable and it can be a huge burden at the business because the rents are very high and the return is never guaranteed.
You will always need higher targets even to come at break even
3. Sub Urban Areas
Sub urban areas refers to those areas which are outside the city but a part of the metro city and basically these are residential areas which have a great scope as they get fixed clientele and lower operational cost as they already know what things are in more demand.
These areas are generally affordable and have scope in future.
Pros
Clean Customers
Generally you get a family oriented customer base which includes kids so all the products related to kids can be sold depending on their age. Families are regular grocery purchasers and tend to purchase items frequently that can again be beneficial for the supermarket.
Mostly these families tend to shop all their stuff in one go and then by regular using items.
Less Competition
These locations are generally not surrounded by big brand chains in urban areas or major supermarkets chains so there is always a chance to grab the opportunity and rule the market.
Fewer competition can result in affection with the local customer and build a dominant position in the local market.
Generally people living in these areas are loyal customers because they appreciate the convenience of having a supermarket near their house.
Opportunity for Community Engagement For Location For Supermarket Franchise
These communities generally tend to be more tight and a grocery store located in such area can grow at a much higher pace if worked nicely.
Organising community focused events, promotions and supporting local suppliers can help develop a great relationship with the locals which can benefit a lot to the business.
Sub urban customers always values the convenience and stay loyal.
Check out this: How To Start A Supermarket Franchise In 2024- A Full Guide
Cons
Lower Foot Fall
As it is located near the residential area only the people living nearby would come and shop and the chances of people coming spontaneously is very less.
The lack of people walking on the street may result in less walk in customers.
The daily sales can be affected by these things as it is very difficult to survive in a business without sales.
Parking Issues
Sub urban people are mostly the ones that shop all the groceries at once so they tend to travel by car and take all the products at once which can result in fluctuating sales.
All the people need to park their cars and it’s an issue because they need parking for the staff too.
Most of the people drive to the supermarket rather than walking which forces them to have a parking.
Limited Product Demand
Sub urban areas cannot support high end products or branded products which only sell in the urban areas as the sub urban areas mostly the retired people with joint families stay.
These types of customers will always prefer the things that just solve the inconvenience and do not prefer luxury in everyday products.
This indicates that the supermarket needs to adjust its products to match local offerings which can limit the high margins at luxury or high end products.
4. Shopping Centre and Malls
These are the most occupied retail places which cater all the high class people and the people who are ready to spend money outside.
These places are generally full of stores such as restaurant, services and other stores.
These locations can offer high level supermarkets which cater the elite group of the society and it could be really profitable.
Pros
Higher Visibility
Malls attract a large number of people so a large number of people get to know about the supermarket and the chances of people coming increases as a lot of people visit malls on daily basis.
The higher traffic can lead to more people coming and buying which can increase the sale and lead to higher profits.
Easy For Customers
Many people prefer to buy their groceries along with looking at the other brands and you may provide the best experience because some people actually love to include grocery shopping in shopping other brands.
It becomes easy for the customer and they have an option to buy whatever they wish to.
Cons
High Rent
This is one of the main drawbacks of a shop in a mall as they have a lot of rent which could disturb the person if the work does not bring out well.
Supermarkets in these malls are often expected to pay extra to cover the cost of shared infrastructure, mall management and security which brings an extra add on in expense.
Not Always Grocery Focused
While a lot of people are attracted towards malls, many people may not come to buy groceries as many come to buy clothes, electronics, movies etc.
Your supermarket needs to compete with a wide amount of retail diners to sell foods which are edible so it can be much difficult.
Conclusion
It is very important for you to select which location you want to cater before opening a supermarket because the location for supermarket franchise will always tell you what things are going to sell in the area.
Here we discussed 3 main areas where one could open their supermarkets and we even discussed the pros and cons of all the areas.
Each and every part should be researched and then taken action so that the chances of getting a successful location for supermarket franchise and successful customer base increases.
In order to start your own supermarket, first decide your budget and then decide which audience you want to cater whether you want to go for higher class or only cover middle and lower middle class.
Highway locations always cater to travellers but fail to gain a loyal customer base because they serve new people daily.
So decide your goal and then decide which area is the best for you where you can bring the best out of your business.