14 Sep 2022

Supermarkets, Grocery Stores, Food Stores and Convenience Stores U S.: Analytics, Extensive Financial Benchmarks, Metrics and Revenue Forecasts to 2030, NAIC 445000

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It should jump out to you immediately that average annual expenses for a grocery store will be made up of the cost of goods and salaries, but can vary greatly depending on the type of products, so again let’s not focus too much on the specific dollar amounts here. What we can gain from this tax return data is an understanding of expenses and profits as a percentage of revenue rather than a specific dollar amount. Last year, our analysis highlighted how grocery retailers were building ecosystems by partnering with tech companies, joining forces with delivery companies, and creating new value propositions. Grocery executives continue to explore ways to create new revenue streams and expand ecosystems, all in an effort to meet consumers where they are.

  • Consumers intend to purchase more regional and local goods (41 percent), high-protein options (34 percent), and offerings that are free from certain ingredients (33 percent), along with other naturally healthy options (Exhibit 3).
  • Companies beyond those known for their environmental, social, and governance (ESG) policies—such as Ben & Jerry’s, FedEx, and LEGO—are increasingly making more decisions based on social and environmental issues compared with 2020.
  • In May 2023, e-commerce stood at 7.2 percent of all grocery spending, more than 35 percent above prepandemic levels (Exhibit 2).
  • Consumers’ quest for savings also extends to a heightened interest in discounts, a pattern that holds true even among high-income shoppers (Exhibit 6).
  • Moreover, grocery stores have become a destination for health and wellness—not just for food but also for nutrition and healthcare services.

The ROI’s exclusive Retail Benchmark Trend Charts show the median value reported by Risk Management Association’s Annual Statement Studies for each of these key ratios each year. The bankers will look at these industry benchmarks as they assess your store’s performance. We partnered with STORY Pitch Decks to analyze the financial projections of 107 of our clients to get a clear idea of what tech startups are projecting in terms of revenue and profitability. Grocers are redefining their business models to capitalize on fulfillment opportunities and adapting their value propositions. They could extend their reach by embracing third-party marketplaces, dark stores, and microfulfillment centers.

Identifying what consumers value most and offering flexibility (for example, options for smaller pack sizes) will be critical to this effort. Possibly because grocers have acquired additional capabilities and flow of goods has increased, supply shortages have now fallen to the middle of the pack of concerns. Grocers are also starting to see the upside from omnichannel; the omnichannel shopper spends two to four times more than the in-store customer. Now the focus has shifted from protecting in-store sales to supporting business both online and in stores through omnichannel excellence.

The transition from fossil fuels to renewable energy is becoming more complex as power outages and increased points of failure threaten disruption of day-to-day operations. The grocery industry’s greater reliance on energy—grocers could consume 40 percent more electricity, on average, by 2030—makes it more vulnerable as stocksfortots energy becomes more expensive and intermittent. As an indication of how sustainability has permeated strategy, 87 percent of food retailers and 91 percent of food suppliers have identified environmental, social, and governance (ESG) as an organizational priority.19The food retailing industry speaks 2023, FMI, 2023.

The ROI has selected six key ratios (from the abundance of ratios available) that are particularly important for retailers to regularly monitor and manage. See The ROI’s Benchmarks Resource Center to learn more about these key ratios for retailers. Calculate these ratios for your own business – see the “Cheat Sheet” for formulas, or save time with the KEY RATIOS Calculator. Given that a majority of the cost is spent on inventory to sell, this majority is not surprising.

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Grocers are improving their share of wallet with omnichannel shoppers by expanding their capabilities in personalized promotions and product recommendations. StarterStory has an incredible database of over 2,600 startup case studies which include many in the D2C Product space, so we pulled together and analyzed a group of 99 D2C startups to learn more about what these companies actually generate in terms of revenue. This underscores the importance of actually creating your own Grocery/Convenience Store projections based on your potential inventory. Not every guideline will relate to every grocery; for help in determining which benchmarks are appropriate for you or to learn how Baker Tilly retail specialists can assist you, please contact our team.

  • Hover over the ratio value in the table to see the exact number of companies included in the calculation.
  • Based on the tax returns of roughly 87,000 sole proprietors operating in the grocery store industry, the following were the 10 largest business expenses as a percentage of revenue.
  • See The ROI’s Benchmarks Resource Center to learn more about these key ratios for retailers.

As margin pressures persist, they should identify growth areas beyond the core to build a broader ecosystem of services and offerings that expand the consumer value proposition, build capabilities, and improve the financial profile of the business. As we have discussed in years past, the best-performing grocery retailers are those that consistently focus on innovation and pursue new ways to create value.1Bill Aull, Becca Coggins, Sajal Kohli, and Eric Marohn, The state of grocery in North America, McKinsey, May 18, 2022. Indeed, the very constraints that keep executives up at night also contain the seeds to jump-start growth, diversify revenue streams, and achieve greater operational performance. Sample
spreadsheet that includes breakdowns by total asset size can be viewed free online. The industry has experienced a groundswell of interest and activity (Exhibit 6). Five years ago, Walmart was the only retailer with ESG targets based on public science; today, grocers, apparel manufacturers, quick-service restaurants, and stores of all formats are seeking assistance with their ESG strategies.

Industry Revenue ($ Billions)

Others—such as labor shortages and the ongoing shift toward automation—have been a long time in the making and will require a sustained commitment to resolve. We hope that this data will be helpful for you as a “reality check” for your financial projections and grocery store business planning process. We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages. Last year, we noted the potential of automation and AI for the retail industry.

Anxious to improve Cash Flow, Profits, and Inventory??

I think we need to remember that this tax return data includes all sole proprietors that categorize themselves in the “Grocery Stores”. It is reshaping commercial activities (for example, through personalization algorithms), corporate functions (such as call-center support and business operation processing), and heavily labor-intensive store activities. Grocers should consider developing plans to harness generative AI to transform their business, capture more value, and accelerate growth opportunities. As a first step, grocers could prioritize relevant use cases—in part by tracking their relative level of adoption among competitors. Based on our consumer research, CEO survey, and market analysis, we believe five trends will shape the grocery landscape in the years to come. With continued uncertainty around the COVID-19 pandemic and grocery inflation the highest it has been in ten years, consumers have become more focused on shopping for the best value in an effort to stretch their dollars.

PRODUCTS

The grocery industry employs nearly three million people in the United States.3“Supermarkets & grocery stores in the US – Employment statistics 2002–2027,” IBISWorld, updated December 29, 2021. Every aspect of the industry’s people model—corporate, in-store, and across every part of its operation—is experiencing an upheaval caused by a rise in absenteeism and attrition as well as by employee demands for flexible labor scheduling. The workforce participation rate plunged dramatically during the pandemic; as of August 2021, it was still 1.6 percentage points below prepandemic levels.

Because ratios convert financial data into a standardized format, they’re used to compare companies within the same industry. When comparing companies in the grocery industry, it’s important to identify industry subsets. High end, specialty grocers like Whole Foods will have substantially different ratios compared to bargain-price grocers. Grocers operate in a fast-paced marketplace with ongoing challenges such as rising costs, economic concerns, employee turnover rates and changing consumer habits. As a result, evaluating your store against key industry metrics is vital to staying competitive in the industry. In addition, retailers that create unique experiences and provide greater convenience will be positioned to compete on more than price alone.

Strategic Retailing Know-How & Resources

These assumptions will allow you to come up with a revenue forecast for your grocery store. By the end of the decade, factors that are now adding to complexity—including energy, recycling, and infrastructure—will become critical. Grocers will need to keep pace with changing trends to remain competitive in the long run. Amid growing disruption, grocers could prioritize sustainability now to ensure longer-term success. For example, switching to renewable energy and forming coalitions to meet recycling goals could improve energy stability and waste management, respectively, while generating returns for grocers over the coming years. According to McKinsey’s Consumer Pulse Survey 2023, 66 percent of consumers have sought out less-expensive goods, an increase of four percentage points from 2022.

Grocers increased their capital expenditures at an amount 1.3 times their historical levels thanks in part to an influx of funding (Exhibit 1). Consider that venture-capital firms raised $10 billion for grocery start-ups in the first six months of 2021 alone. As investments continue to pour in, we expect these enhanced capabilities to disrupt the food ecosystem.

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