HOW TO – Start a Supermarket

Posted on March 24, 2017 | 7 comments

A Supermarket is a large self-service shop selling foods and household goods, according to the English Oxford Living Dictionary. In Uganda, you might want to avoid sticking to that definition by erasing the term large.

We have supermarkets that cover over 5000 Sq. Metres while those in most residential neighborhoods are as small as 20 Sq. Metres. It’s important that we have a similar appreciation of what a supermarket means in the Ugandan context before going ahead with this article.

One of the businesses Ugandans have given attention in the last ten years is the Supermarket business. As a supplier of products to supermarkets, I have an eye for locating the new ones considering that the wider I cast my net, the more sales I make.

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A typical neighborhood supermarket in Kampala, Uganda

From my observation, this is one of the easiest businesses to set up and yet potentially challenging to run. You could choose to directly manage its operations or hire a team to do so. The former option is likely to reduce on the operational headaches by far.

What do you have to consider when setting one up?

  1. Location: The biggest success factor for this business is location. Where you put your supermarket will clearly determine not only the category of clients you attract but also their numbers and frequency of shopping. A supermarket located by the roadside with little or no parking slots for cars had better be near a busy public transport stage. You could also locate it in an affluent suburb or on the road leading to such a suburb from a busy work area of the town. However, in this case, having good parking is a big advantage considering the likely transport mode for most of the middle class families. One of the best locations also is residential areas. Setting up one within an estate or its environs offers a much bigger market guarantee especially if the estate is big in size.

  2. Ground Floor: Wherever the location you settle for, always insist on having the supermarket on the ground floor. Anything short of that will lead you to failure right from the word go. Most Ugandans are not into the habit of climbing stairs just to get stuff done. It is the reason you find most of the storeyed buildings in the city having tenants occupying only the first three floors with the rest being empty. Suppliers also have an easy time when delivering products since having to lift them to higher levels might involve much more labour and time.

  3. Parking: Availability of parking for cars is crucial if you want to reach out to an affluent or mixed client base. Depending on your location, you might want to insist on having parking space near or at the front of the supermarket.

  4. Branding: This can be a complex matter but in the most basic way, simply ensure that you come up with an appealing name and graphics for the business. This process needs to put into consideration your likely target customers and long term plan for the business.

  5. Fittings: Get your internal fittings right. The shelves, cold storage facilities, tables, security among others. The extent of these fittings is determined by the spread of services and products you intend to provide. A basic no frills supermarket intent on merely retailing basic household goods would focus on shelves, a cashier’s table and one or two fridges.

  6. Supply Chain: Supermarkets need suppliers in order to serve their customers. Supplier X brings her baked Cakes, the supermarket displays them on the shelves and customers buy. After sale, the supermarket notifies the supplier to restock as well as receive payment for the previous consignment. The beauty with this is that as you set up the supermarket, suppliers start flocking the venue asking to be registered. So, it is among the easiest to handle.

  7. Human Resource: You need people to run the supermarket. Even when you choose to manage it directly, depending on your scale of operation, there is always that need for a few extra hands to help in:

    • Attending to customers

    • Receiving products from suppliers

    • Security

    • Cleaning the supermarket

    • Managing books of accounts, e.t.c.

  1. License: Get a trading license from the local authorities. This trading license is paid for annually and has to be factored in as one of the recurrent costs.

  2. Business Registration: With things getting tighter in Uganda today, you can hardly open up such a business without having some form of registration. Identify whether you want to register a Private Limited Company, Sole Proprietorship, Partnership or any other mode. This is a pre-requisite in order to get a Tax Identification Number from the Uganda Revenue Authority.

  3. Business Plan: Try to have some form of written business plan. I know, when I talk about this, you’re probably imagining a one hundred page document filled with all sorts of academic brouhaha!!! No. A business plan can be as simple as a three page document listing the key issues and how you plan to deal with or achieve them. In the case of a supermarket, one of the issues you need to address is the products and their pricing.

    • What mark-up do you place on your products and how does the eventual price affect the ability of your target market to purchase?

    • What type of products do you stock? You have no need stocking electronics like Televisions in a supermarket located in a housing estate. That shelf space is better used stocking washing detergents.

    • What product sizes or packaging do you opt for? Detergents like Ariel or Omo are on high demand and purchased by most households. However, the purchase quantities vary from one market segment to another. The affluent moneyed class prefers to buy the One Kilogram or even Five Kilogram packs while the low income households prefer to buy the smaller 100 gram packs. Study your market and stock the right product sizes.

  1. Return Policy: Set a clear policy on product returns. Often times supplied products get expired, damaged or might be defective right from the factory. As a supermarket, you do not have to bear that as a loss, it should be clear to the suppliers that they replace any products that cannot be sold to customers for one reason or another.

  2. Supplier Payments: Most suppliers offer credit to supermarkets save for a very few like Milk and bread suppliers who tend to collect their money upon delivery. However, for those that extend credit, it’s crucial that you have a very organised system of managing them. Some supermarkets settle outstanding invoices every two weeks, thirty days or even forty five days. Others clear each pending invoice upon product depletion on the shelf. Setting up a predictable payment system for the suppliers not only endears you to them but also ensures that you manage your cashflow better. This particular point is the reason Uchumi Supermarket closed operations in Uganda and Nakumatt Supermarket too is currently struggling to remain in business.

  3. Point of Sale System: This is an electronic system used to record transactions at the point of payment in a shop or supermarket. It could be crucial or not depending on your scale of operation. If it’s a small Mom & Pop neighbourhood supermarket that you directly manage, you may start without it. However, for a business you aren’t actively managing, this system will help you so much as it allows you to make daily audits of sales by recording all transactions.

  4. Theft: For as long as you get into this business, expect this to be a sticking issue. Globally, supermarkets put a 3% mark-up on their product pricing to cater for just this. While you can employ technology and other means to reduce its prevalence, theft will always occur. How does it happen?

    • Walk-in customers. There is always an army of people who have made it their livelihood to steal products from supermarket shelves and find their way out without paying. This is one of the reasons you need an extra hand to run the supermarket. They can keep watch over such activities. However, what happens if they collude?

    • Crooked Suppliers. There are cases of suppliers who deliver less than what has been indicated on the invoice. It implies that you pay them for goods that were never supplied in the first case. Matters are made worse when they collude with your staff to make these false declarations.

    • Staff. Internal supermarket staff could also be a source of illicit product loss. They tend to take advantage of the trust bestowed upon them to engage in theft. In bigger supermarkets, they are known to form networks that ensure the untraceability of their illegal activities. The closed Uchumi Supermarket was a glaring example that suffered from internal staff theft.

  1. Money: Finally, have money. While I cannot give you financial estimates, by perusing through the list of issues presented so far, you can get a good idea of what to prioritise and hence determine how much you need to set up the business. The best thing about it all is the fact that product stocking which tends to cost a lot is largely on credit hence reducing the overall initial financial burden.

I hope you are now ready to start that supermarket business. Do not waste any more time. Get at it right away.

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda

Follow @wirejames on Twitter

Other Articles of Interest:

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President Museveni, avoid Knee Jerk reactions on Installing Security Cameras

Posted on March 20, 2017 | 6 comments

The death of Afande Felix Kaweesi (RIP) took us all by surprise and matters were worsened by the brutal and professionally executed hit. In the aftermath of this occurrence, President Yoweri Museveni was quoted by various media houses as having stated that installation of cameras along public roads should be done as soon as possible.

In the run up to the 20th Common Wealth Head of Governments’ Meeting (CHOGM) held in Kampala, Uganda in 2007, installation of security cameras was on the To Do list. One of the reasons given was that they would continue providing surveillance long after the event. Apart from seeing remnants of poles and housing units for cameras, that project died as fast as it was birthed. Money was spent procuring these cameras, installation was probably done but that is as far as things went.

Mr President, before you embark on another spending spree to procure new cameras, I have a humble appeal. Please do not follow the knee jerk reaction on this matter. Many of your people may be looking at this need merely as a procurement opportunity without internalising its overarching importance towards facilitating crime management in the city of Kampala.

As steps are taken towards implementing your directive, it is crucial that certain things are kept in mind. These include;

  • Needs Assessment and Budgeting – Apart from equipment costs, time and labour required can also be intensive. Product quality is also key as opting for low cost products without considering their abilities could lead to challenges like low quality images hence creating challenges during evidence collection, poor visibility at night or during the rain among others.

  • Planning for Infrastructure, Maintenance and other recurrent costs – In Uganda, we have a tendency to believe that initial costs are all that matters when acquiring technology. Plan ahead for costs of maintaining infrastructure eg Wireless connections to the data centre may require servicing, obstructions could occur near the cameras and have to be removed, cameras may have to be replaced and even outright vandalism of some cameras could occur. In cases of non networked cameras, there might be a need for a team of people to physically collect data from them periodically among other activities. This is where probably the CHOGM camera project went wrong.

  • Technology Integration – Our security forces already have different technologies in use. The Police for example has license plate recognition software which is used a lot to get ticket defaulters. The camera system installed should be able to integrate this and other technologies including facial recognition, gunshot detection, incident mapping, video analytic among others. That way, we shall avoid having silos of technologies that are not interoperable, a waste of tax payers money.

  • Policy Development – There needs to be policies in place to manage this surveillance. It is crucial to achieve a balance between protecting citizens’ privacy rights and enabling law enforcement officers utilise the technology in an effective manner.

  • Active Monitoring Vs Passive Monitoring – Active monitoring is real time monitoring where locations are observed continuously while passive is the opposite. The former approach is a lot more resource intensive but allows the security agencies achieve much more especially when it comes to preventing crime. However, does Uganda’s force have the capacity to actively monitor a widespread camera system covering the entire Kampala city? Maybe a mix of Active and Passive would work best. Certain areas considered hot spots could be monitored actively while for those that are less dangerous, a passive approach can be undertaken. This decision will also inform on the type of technology to be deployed where.

  • Integrating Camera systems with current practices – There are procedures and practices that the security systems are utilising to monitor and manage crime. These do not have to work in isolation with the Camera systems. Could there be a need to mount cameras on all Police Patrol cars for example? In danger spots, can patrol teams be deployed in areas where the camera coverage is poor or where they expect criminals to seek refuge from the cameras?

  • Cameras are not a replacement to normal security duties – It is important to ensure that there is no sloppiness that develops on the part of the security officials as a result of camera installations. The old school physical engagements of investigating, tracking and preventing crime still apply. These cameras should be viewed as the icing on the cake. Footage can be used to corroborate information, identify culprits and witnesses to be interviewed among others.

Any eventual decision on the kind of Cameras to use should not restrict itself to a particular model of cameras but instead opt for a variety of camera models with different abilities. There will however be a need to get assurances from the vendors about their interoperability with other vendors’ equipment.

Technologies that need to be integrated in the procured system should include among others;

Gunshot Detection Systems: They work by utilising a system of sound sensors installed all over the target area. By scanning sounds in the area, these sensors are able to decode whether it is from a gun or not and through a triangulation approach offer an approximate location where the shot was fired from. Integrate this with crime mapping software and you will easily know theneighborhood in question.

License Plate Recognition: This scans number plates of cars and can verify with any database to determine whether the car in question has uncleared tickets, has been reported stolen or any other issue as brought to the attention of the authorities.

Facial Recognition: Advances in technology now allow computer software to be able to match faces when compared with database entries. By integrating this software with the cameras, one should be able to quickly track offenders especially the repeat offenders.

There is a lot more to share on this but it is my hope that this time round, the Government of Uganda manages this project the right way in order to achieve its intended goals without financially haemorrhaging the public coffers.

For God and My Country !!!!

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda

Follow @wirejames on Twitter

Other Articles of interest:

Additional material from Using Public Surveillance Systems for Crime Control and Prevention by Nancy G LaVigne, Samantha S Lowry and others.

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