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Combatting grocery costs

Extending the long arm of the law makes financial sense
By Erica Strada

The price of growing and producing food is going up, which is translating into higher costs at the grocery store, making life difficult for small grocery stores that already struggle against the larger chains.

"When grocery costs rise, small business owners panic because they are reluctant to raise prices," says small business expert Greg Kopchuk of ActionCOACH Canada. "They usually know their regular customers better than the average big grocery chain, and because of that they don't want to pass the cost on to their customer. As a result, it eats away at their profits. You wouldn't believe the number of local grocery stores that haven't raised their prices in five years because of that reason. That's why 80% of all businesses close their doors every 10 years."

Kopchuk has the following advice:

1. Increase prices on some products and do several small increases over time. Always look for ways to reduce overheads. Work on getting customers to come back more often and get them to spend a little more each time. Also work on converting more people who come into the store.

2. Watch your margins and act accordingly. At a sample 40% margin, a 10% price increase could sustain a 20% reduction in your sales volume.

3. Do NOT increase prices on staples (milk, butter, eggs) unless you have no choice. Even Safeway had to reduce their prices in 2010 in order to compete with Loblaws.

4. Make sure your store is spotless (so clean you would eat off the floor!)

5. At the register, make sure customers are within easy reach to profitable addons— magazines, candy, chips, pop, knick-knacks. The higher the margin, the closer it should be to the register.

6. Keep all the low-margin stuff at the very back of your store.

7. Keep an eye on quality and customer care. If you sell the same quality of apples as the neighbourhood Megalomart, why would anyone bother coming to you? If customers have to wait in line just as long, why will they come to you? And again, your store should be famous for being clean.



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