How Much Do Supermarkets Make? (Average Supermarket Revenue Data 2024)

How Much Do Supermarkets Make? (Supermarket Profit Margin)

Supermarkets drive a staggering amount of money in revenue. In fact, the Food Industry Association reports that the average grocery store generated an incredible $623,188 per week in 2023.

However, supermarkets also operate on notoriously low profit margins. Other data provided by FMI indicates that the average pre-tax profit margin on total revenue is just 2.2%. Furthermore, this number drops to 1.6% after paying taxes.

Clearly, if you hope to be successful in the food retail industry, it’s key that you maximize your profits however you can. To do this, you’ll need to focus on two main things: boosting supermarket revenue and minimizing costs.

So, in this article, we’ll explore the common challenges grocery stores face in remaining profitable. We’ll also provide a breakdown of average monthly operational costs, explain how you can reduce those costs, and cover how to maximize your revenue.

Key Takeaways

• Food retail businesses operate on thin profit margins. So, even though your supermarket revenue may be high, it’s key to control costs and improve operational efficiency to ensure you can be profitable.

• There are two key components to maximizing your grocery store’s profits: minimizing costs and boosting revenue.

• The total operational costs for the average supermarket tends to be between $1,570,000 and $2,420,000 per month. However, these numbers can vary significantly based on your store’s location, size, and other factors.

• Key strategies for reducing grocery store operational costs include effective inventory management, labor efficiency, energy efficiency, and streamlining overall operations.

• The best tactics for boosting supermarket revenue include effective marketing, efficient use of technology, and increasing the value and frequency of customer purchases.

Are Supermarkets Profitable?

Supermarkets can be profitable, but they operate on thin margins, which means efficient cost management and strategic planning are essential. 

As we mentioned above, the standard net profit margin for supermarkets in 2023 was around 2.2% before taxes, and just 1.6% after paying taxes.

So, even though supermarkets typically generate significant revenue, this slim margin indicates that operational costs consume a large portion of it. 

However, these small margins are critical to remaining competitive in the food retail industry. Commenting on Costco’s 2.5% profit margin from the first quarter of 2022, Noor Abdel-Samed, a managing director at L.E.K. Consulting, said:

“That’s perfectly fine, it’s healthy. If you try to boost that too much by raising prices, then people stop shopping. If it gets too low, then you don’t have any cash to throw around to invest in new locations… So it’s all carefully calibrated to remain competitive versus other people, but also to be able to sustain operations and drive enough profitability to continue and grow.”

Overall, profitability depends on managing costs effectively and implementing strategies to enhance revenue while remaining competitive.

Average Supermarket Revenue Expectations

Revenue is the total amount of sales you bring in before accounting for costs. On average, United States supermarkets generate weekly sales of about $623,188. This translates to sizable figures when projected over longer periods:

• Monthly Revenue: By multiplying the average weekly sales by four, you can expect around $2.49 million in sales each month.

• Yearly Revenue: By multiplying average weekly sales by 52, annual sales amount to over $32 million.

These figures provide a general benchmark for what the average grocery store can expect to make in terms of sales volume.

Average Supermarket Profit Expectations

Meanwhile, profit is the amount of money you make after accounting for operational costs. To calculate profits, you need to subtract your costs from your total revenue.

Despite the impressive sales figures, the supermarket industry is known for its slim profit margins.  

Before accounting for taxes, the typical supermarket can expect to make $13,710 per week. We calculated this number by multiplying the average weekly revenue by the industry average pre-tax net profit rate of 2.2%.

After paying taxes, a grocery store can expect to make $9,971. We determined this number by multiplying average weekly revenue by the post-tax industry average rate of 1.6%.

We can also calculate the average monthly and yearly profit margins by multiplying average revenue by the average net profit margin percentages:

• Monthly Profit: With sales of $2.49 million per month, the monthly net profit would be around $54,780 before taxes, and $39,840 after taxes.

• Yearly Profit: With sales of $32 million per year, the annual net profit would be around $704,000 before taxes, and $512,000 after taxes.

These calculations highlight the importance of efficient management and cost control in maintaining profitability in such a slim margin business.

Challenges Impacting Supermarket Profits

Supermarkets must deal with several challenges when it comes to minimizing costs and generating maximum revenue, including:

1. Shrinkage: Losses due to theft, spoilage, or administrative errors can significantly impact profits. Implementing strict security measures and efficient inventory tracking can help mitigate this issue.

2. High Labor Costs: Labor is one of the highest costs for supermarkets. Inefficient labor management or overstaffing can erode profit margins. Investing in labor management systems and training programs can help control these costs.

3. Utility Expenses: High energy consumption from refrigeration and lighting can be a major expense. Upgrading to energy-efficient systems and maintaining equipment can reduce these costs.

4. Supply Chain Disruptions: Issues such as supplier delays or increased costs due to transportation can affect inventory levels and costs. Diversifying suppliers and optimizing supply chain logistics can help manage these risks.

5. Market Competition: Intense competition from other supermarkets, discount stores, and online retailers can pressure prices and reduce margins. Differentiating your store through unique products, superior customer service, or a better shopping experience can help mitigate this pressure.

6. Regulatory Compliance: Costs associated with complying with health, safety, and labor regulations can be significant. Staying informed about regulatory changes and investing in compliance can help you avoid fines and reduce compliance costs.

By better understanding the challenges your grocery store faces, you can take steps to mitigate them and increase your profitability.

Breakdown of Monthly Costs For Supermarkets

When opening and operating a supermarket, it’s essential to have a clear understanding of the cost structure of your business operations. 

Generally, the average supermarket can expect monthly costs to add up to $1,570,000 on the low end and $2,420,000 on the high end. However, bear in mind that costs can vary based on the size of your supermarket, its location, and other factors.

To help you better understand the costs associated with operating your grocery store, here is a high-level breakdown of costs by category.

Rent and Utilities

Depending on your location and the size of your store, the cost of monthly rent and utilities can vary significantly. For example, you can expect to pay much higher rent costs in high cost of living areas, like New York City, NY, compared to lower cost of living areas, like Dayton, OH.

Even different areas within the same city can have extremely different rent costs. 

For example, Northeast Philly Retail reports that the average cost to rent a retail space in Center City Philadelphia is about $32 per square foot. Meanwhile, retail spaces in Northeast Philadelphia cost an average of $19 per square foot.

However, Statista reports that the average asking rent for retail estate in the United States in the first quarter of 2023 was $23 per square foot per year, or about $1.92 per square foot per month.

Meanwhile, The Food Industry Association reports that the average total supermarket size is 48,575 square feet. Therefore, the average supermarket may expect to pay about $93,264 per month in rent.

Of course, you also need to think about utilities. According to EnergyStar.gov, the average energy costs for grocery stores is about 33 cents per square foot per month. Using the average supermarket size, this equates to about $16,030 per month.

So, here is the breakdown of average costs for supermarket rent and utilities:

• Average Monthly Cost of Rent: $93,264; depending on size and location, this may range from about $20,000 to $100,000 or more

• Average Monthly Cost of Utilities: $16,030; depending on size and location, this may range from $5,000 to $20,000 or more

• Total Monthly Rent and Utilities Cost: $109,294, though depending on location and size, this number could fall anywhere between about $25,000 and $120,000 or more

Labor

Another one of the most significant costs for grocery stores is salaries, wages, and benefits. 

In fact, according to a study by TimeForge, the median labor cost percentage for supermarkets is 9%. Labor cost percentage is the percentage of revenue that goes towards payroll. Additionally, this percentage accounts for benefits like health insurance, retirement plans, payroll taxes, and more.

If we apply the median 9% labor cost percentage to the average monthly supermarket revenue, the typical grocery store can expect to spend $224,100 per month on labor.

• Total Cost of Payroll and Benefits: $224,100, though the cost typically falls between $60,000 and $250,000 or more depending on store size, location, and the level of services you offer

Inventory Costs

The biggest expense for any supermarket is typically the cost of purchasing and replenishing inventory.

A 2023 analysis by Projection Hub found that the average grocery store spends 68% of total revenue on material costs. Also referred to as cost of goods sold (COGS), this represents the expenses related to acquiring and producing products to sell in your store.

If we take the average percent of revenue spent on material goods and multiply it by the average monthly supermarket revenue, the cost equates to $1,693,200 per month.

Remember, though, that this is just an average. With efficient inventory management, you may be able to get the percentage of revenue spent on material goods down.

Total Inventory Costs: $1,693,200, though the cost can typically range from $1.5 million to $2 million

Marketing and Advertising

In order to reach more customers, it’s key that you set aside a portion of your budget for marketing and advertising. The amount you spend will vary a lot from store to store, and depends on factors like local competition.

According to eLynxx Solutions, the average grocery store spends between $10,000 and $20,000 per year, or $830 to $1,600 per month, on printed marketing materials such as:

• Store signage

• Product labels

• Coupons

• Circulars

However, your grocery store may also want to spend money on other types of advertising, like digital ads.

Overall, marketing campaigns can be a great way to increase revenue, even if you do incur some additional costs.

• Total Marketing and Advertising Costs: You’ll generally want to budget $5,000 to $20,000 for both print and digital ads, though this amount can vary significantly based on your needs.

Maintenance and Repairs

To keep operations running smoothly, it’s key that you keep your store well-maintained and repair broken equipment quickly.

Kaivac reports that the average grocery store spends $101,900, or about $8,500 per month, on equipment repairs and maintenance. Approximately one-third of that cost goes towards refrigeration maintenance, while HVAC and general repairs account for about 9%.

Ultimately, maintenance and repair, especially for refrigeration, is critical for food safety and maintaining the trust of your customers.

Finally, keep in mind that, even if you don’t currently need repairs, investing in preventative maintenance now can prevent more costly repairs in the future. After all, emergency repairs requiring a fast turnaround come with a higher price tag.

• Total Maintenance and Repairs Cost: $8,500 per month, although the cost can typically fall anywhere between $3,000 and $10,000 per month

Insurance

There are many different types of insurance for supermarkets, so the monthly cost will depend on the type of coverage you need.

Generally, however, Next Insurance reports that most grocery stores will secure at least the following types:

• General Liability Insurance: Helps protect you from financial losses due to customer injuries, accidental property damage, and copyright infringement

  • Average Cost: $564 per month

• Workers’ Compensation Insurance: Helps pay for medical bills and lost wages if an employee suffers an injury while working

  • Average Cost: $114 per month

• Commercial Property Insurance: Helps with equipment repair and replacement costs, as well as inventory and property damage caused by covered events

  • Average Cost: $69 to $107 per month

Of course, depending on your needs, you may also want to get coverage such as commercial auto insurance or liquor liability insurance. 

Ultimately, it’s a good idea to research the types of coverage you may need so you can budget for this expense appropriately.

• Total Cost For Insurance Premiums: $2,000 to $10,000, depending on the type of coverage you need

Miscellaneous Expenses

Finally, you should think about other miscellaneous expenses you might need to budget for. For example, consider the costs of:

• Technology, like your POS system and accounting software

• Office supplies, like pens and paper

• Other small recurring expenses, like banking fees or credit card processing fees

The cost of these miscellaneous expenses can vary a lot depending on your store’s needs, so be sure to give careful consideration to anything else that could eat into your profit margins.

• Total Miscellaneous Expenses: $2,000 to $10,000, depending on the miscellaneous needs of your grocery store

How To Minimize Supermarket Operational Costs

One of the two ways to maximize your supermarket profits is to minimize your operational costs.

Below, we explore some great strategies for reducing expenses that can otherwise eat into the revenue you generate.

Inventory Management

According to a study conducted by IHL Group, inventory distortion accounts for $818 billion in losses for food retailers each year. After all, inventory management is one of the toughest challenges supermarkets face. 

Overstocking can result in food spoilage and waste, as well as high holdover costs. Meanwhile, understocking can mean customers may not be able to buy the products they want, resulting in a subpar customer experience.

So, to reduce costs associated with supermarket inventory management, use technology so you can track up-to-date stock levels. 

For example, Toast’s POS system allows you to monitor inventory levels, view detailed sales reports, automate invoicing, and much more.

It’s also a good idea to build strong relationships with your suppliers. This can ensure favorable pricing, on-time deliveries, and high product quality.

Remember, ordering and restocking material goods is typically the largest expense for grocery stores. By effectively managing your inventory, you can prevent these costs from eating into your profits.

Labor Efficiency

As we mentioned earlier, labor expenses are another one of the biggest costs for supermarkets. However, by improving labor efficiency, you can keep your labor cost percentage down.

To achieve this, consider implementing flexible work schedules and cross-training employees to reduce the need for additional employees.

Likewise, you can incorporate a self-checkout system to lessen the need for cashiers.

Automated stocking solutions can also streamline inventory counting tasks, freeing up your workers to focus on other responsibilities.

Ultimately, by using technology to your advantage, you can streamline your operations for better efficiency and less labor dependence.

Energy Efficiency and Maintenance

Another great way to lower your operational costs is by investing in energy-efficient equipment, such as:

• Refrigeration

• Lighting

• HVAC systems

By using more energy-efficient solutions, you can lower your monthly utility bills.

Additionally, it’s a good idea to invest in regular preventative maintenance to avoid equipment breakdowns and ensure efficient operations.

After all, if refrigeration equipment breaks down, you may lose out on sales of refrigerated products while it undergoes repair. This can also result in a poor customer experience, which could deter customers from returning to your store.

Preventative maintenance also helps you avoid requiring emergency repairs, which often come with a high price tag due to the need for a quick fix. 

Overall, by investing money in preventative maintenance now, you may be able to save money in the long run.

Operational Streamlining

One more way to reduce operational costs is to continuously analyze and improve your processes. This way you can eliminate any inefficiencies.

For example, if you review your sales data to discover your off-peak hours, you may want to adjust your staffing levels to reflect the decreased need for workers during that period.

Additionally, you should regularly review your expenses and implement cost control measures wherever possible. This could involve:

• Renegotiating more favorable supplier contracts

• Optimizing supply chain logistics

• Reducing waste

Ultimately, by streamlining your operations for optimal efficiency, you can ensure you see a return on the investments you make, whether it be inventory, labor, or maintenance.

How To Boost Supermarket Sales Revenue

Of course, reducing operational costs isn’t the only way to increase profits. You should also consider how you can increase your supermarket’s revenue.

So, be sure to consider implementing the following tips in order to boost the total amount of sales your grocery store can generate.

Improve Marketing Effectiveness

One key tactic for boosting supermarket revenue is to invest more in effective marketing strategies. After all, good marketing can be key to enticing customers to visit your store, especially if you’re in a competitive market.

To improve the effectiveness of your marketing, consider the following strategies:

• Targeted Advertising: Use data analytics to understand customer demographics and preferences. Tailor advertising campaigns to specific customer segments to increase their relevance and impact.

• Digital Marketing: Leverage social media, email marketing, and online advertising to reach a broader audience. Utilize platforms like Facebook, Instagram, and Google Ads to engage customers and promote special offers.

• Loyalty Programs: Implement loyalty programs that reward repeat customers with discounts, points, or special offers. This encourages repeat business and increases customer retention.

• In-Store Promotions: Run in-store promotions and events, such as product tastings, cooking demonstrations, or seasonal sales, to attract more customers and boost sales.

While some forms of marketing and advertising may require you to invest some money upfront, it can result in a high ROI if you do it well.

Support ProductivityWith Technology

Not only is technology key for reducing costs, but it can also significantly improve your supermarket revenue. 

For example, with a tool like Toast’s POS system, you can:

• View Sales Data: By viewing key business data, like your most popular products and inventory turnover, you can make more informed decisions about product placement.

• Streamline Checkout: With self-checkout systems and accepting multiple forms of payment, you can make the checkout process more efficient and customer-friendly.

• Improve Customer Relationship Management (CRM): CRM systems can help you better understand customer behavior, personalize marketing efforts, and improve customer service.

• Incorporate E-Commerce Platforms: You can offer online shopping options with delivery or curbside pickup. This not only increases convenience for customers, but also expands your market reach.

• Reduce Stockouts: While you need to be careful not to overstock products, inventory management technology can help you ensure items are in stock so customers are able to purchase them. This helps you avoid lost sales due to understocking.

Overall, using the latest technology is key for driving maximum revenue, supporting a streamlined customer experience, and helping you keep up with the competition.

Increase Average Order Value (AOV)

Another great strategy to increase your grocery store revenue is encouraging customers to spend more during each visit.

There are a few different approaches you might consider to accomplish this, including:

• Offering Premium Products: Premium and specialty products typically have higher profit margins. These can include organic produce, gourmet foods, or exclusive brands.

• Cross-Selling and Upselling: Train staff to suggest complementary products (cross-selling) or higher-end alternatives (upselling). For example, if a customer buys pasta, place complementary items, like a premium pasta sauce or a bottle of wine, close by.

• Bundling: Create product bundles that offer a discount when purchased together. This encourages customers to buy more items than they initially intended.

• Store Layout and Signage: Optimize your supermarket design to highlight high-margin products and create attractive displays. Additionally, use signage to guide customers to promotional items or new arrivals.

Just remember to stay true to what your target customers want. For example, if your supermarket idea emphasizes affordability, premium products and upselling could rub them the wrong way.

Instead, it would make more sense to focus on the bundling and store layout strategies to highlight deals and savings.

Increase Frequency of Customer Purchases

While increasing the average amount spent per visit is a great strategy for boosting supermarket revenue, so is increasing the frequency of customer visits.

To encourage customers to buy from your grocery store more often, think about implementing these strategies:

• Subscription Services: Offer subscription services for frequently purchased items, such as weekly grocery boxes or monthly deliveries of household essentials.

• Regular Promotions: Implement regular promotions, such as weekly specials or loyalty discounts, to give customers a reason to visit more often.

• Customer Engagement: Engage with customers through social media, newsletters, and mobile apps to keep them informed about new products, upcoming promotions, and store events.

• Community Involvement: Participate in community events and sponsor local activities. Building strong community ties can increase customer loyalty and drive more frequent visits.

Ultimately, the more often customers that visit your supermarket, the more revenue you can generate. And the more revenue you can generate, the more profit you can make.

Drive More Supermarket Revenue and Reduce Costs To Maximize Profits

As we’ve mentioned, supermarkets operate on very thin profit margins. However, by minimizing costs and maximizing revenue, you can ensure your supermarket remains profitable.

To achieve this, it’s key that you improve your operational efficiency by streamlining inventory management, making data-informed business decisions, and enhancing your customer experience.

Of course, Toast’s suite of tools can help you do all of these things and much more.

So, to learn how you can maximize your grocery store’s profits with Toast, check out all of these awesome features!

Related Resources

• Best Supermarket POS Systems
• Supermarket Business Plan
• How to Open a Supermarket
• Supermarket POS Software
• Supermarket Marketing Ideas
• How to Design a Supermarket
• Supermarket Ideas and Concepts
• Supermarket Inventory Management
• Cost to Open a Supermarket
• How to Run a Supermarket
• Supermarket Equipment