4 Steps to Prepare a Professional and Practical Supermarket Project Feasibility Study in Saudi Arabia

Preparing a feasibility study for a supermarket or grocery store project is a necessary step and a roadmap for your project to help you evaluate all the critical factors to assess its chances of success and determine the expected profits.

Therefore, we have prepared this article to learn through it how to prepare a feasibility study for a supermarket store in Saudi Arabia in a practical and sound economic manner, so make sure to continue reading the article until the end so that you do not miss any information.

Article Contents

● What is the difference between a grocery store, a supermarket and a hypermarket?

● Steps to prepare a feasibility study for a supermarket project in Saudi Arabia

What is the difference between a grocery store, a supermarket and a hypermarket?

Many investors who want to open a supermarket project in Saudi Arabia do not know the difference between these three terms, and the following is a summary of the difference between them:

● Minimarket store: A term used for small grocery stores that are not less than 24 square meters in area, and are only allowed to sell specific products.

● Supermarket store: A term used for medium-sized grocery stores, which are not less than 100 square meters in area, and are also allowed to sell certain products, such as: drinks, ice cream, nuts, coffee, spices, vegetables, fruits, dates, cheeses, pickles, meat and fish, tobacco products, and other products. In addition to semi-automatic bakeries (provided that the store area is not less than 150 square meters), and fully automated bakeries (provided that the store area is not less than 200 square meters).

● Hypermarkets: A term used for large Al-Othaim grocery stores, which are not less than 500 square meters in area and are allowed to sell all products prohibited for grocery and supplies in addition to additional products, such as automated bakeries, travel and entertainment tools, electrical appliances, electronics, clothing, pharmacy products, etc.

Steps to prepare a feasibility study for a supermarket project in Saudi Arabia
We will learn below about the basic steps for preparing a feasibility study for a supermarket project in Saudi Arabia:

1. Market study in the target area
At this stage, you need to carefully study the geographical area targeted for your project, collect information about supermarkets in the area, information such as the number of stores, location, pricing strategies, rental prices, labor salaries, suppliers, retailers and wholesalers they deal with.

Also study your potential customers well, for example, in low-income areas, customers focus more on basic commodities such as oil, sugar, rice, milk and meat, while in high-income (upscale) areas, customers are interested in basic commodities in addition to luxury goods such as pet food, appetizers and imported foods.

2. Conduct a financial study
This step is one of the most important steps in preparing a supermarket project feasibility study because it determines the project costs and expected net profits. The following are the most important points that must be calculated in this step:

● Shop rental price: Shop rental prices vary according to the area and area, so this point depends on your budget, taking into account that the shop area should not be less than 24 square meters until the municipality approves it and issues you a license. In general, the average annual rent of a shop ranges from 30 thousand riyals to 120 thousand riyals depending on the area and region.

● Cost of shop contents: This includes the following costs: an external sign for the shop, transparent glass doors, air conditioners, shelves, a fire extinguisher, a sales system, a complete cash register, an insect trap, an internal and external surveillance camera, and refrigerators (but do not buy refrigerators for ice cream, dairy products, and soft drinks because you will get them for free from the company). The shop contents will cost you about 30 to 60 thousand riyals if they are new, and if they are used, the amount may be reduced by about half depending on the condition of each item.

● Shop merchandise: The shop merchandise will cost you an average of 40 to 60 thousand riyals if the shop area is less than 100 square meters, and about 80 to 120 thousand riyals if the shop area exceeds 200 square meters, because the more you increase the area of ​​the place, the more merchandise you will be required to add to cover the remaining area.

● Monthly shop bills: The shop will cost you monthly water, electricity, communications and internet bills. These bills may cost you between 2,000 and 5,000 thousand riyals per month depending on the area of ​​the shop.

● Monthly labor salaries: To deliver orders to homes, clean the shop, store the goods and place them on the shelves, and the cashier, one worker will cost you between 2,500 and 4,500 thousand riyals per month depending on the area, and what you will provide for the worker in terms of housing and food.

● Cost of a commercial activity license: The cost of a commercial activity license varies according to the area of ​​the shop, as each square meter costs you an average of approximately 100 riyals per year, i.e. a shop with an area of ​​50 square meters may cost you about 5 thousand riyals to obtain a commercial activity license for it.

● Expected sales volume and revenues: By studying the supermarkets competing with you in the area, you can determine the volume of daily, monthly and annual sales, then calculate the volume of expected revenues.

In general, the average profit margin for a supermarket project is between 15% to 20% of the value of the invested capital, and the more your sales of entertainment and cosmetic products, the higher this percentage is because these products achieve a large profit margin compared to basic commodities.

Daily grocery sales range between 200 to 500 riyals, while daily supply sales range between 1000 to 2500 riyals per day approximately depending on the area.

3. Marketing Strategy
The marketing strategy is one of the main pillars in the feasibility study of a supermarket project in Saudi Arabia because without marketing, your customers will not know about your existence, and you will close your project as soon as possible. At this stage, you need to follow 3 main axes, which are as follows:

● Use Social Media: Create accounts on TikTok, Snapchat and Instagram and upload videos of new products and offers on a daily basis.

● Offer discounts and promotions: You will initially need to offer discounts and promotions to attract new customers and build a base of regular customers.

● Sign up with grocery delivery apps: Yes, this is an effective marketing method, because a large percentage of Saudis rely mainly on these apps, so your supermarket should be located there, examples of these apps include: Tabby, Na3na3, HungerStation, etc.

4. Issuing a commercial license for the supermarket
You can obtain it through the Baladi government platform, it will require some information from you to submit an application, the most important of which are: the establishment record and specifying the area of ​​the store and activity, specifying the location of the supermarket and details of the place, the commercial register, the type of contract, and other data related to the supermarket owner.

Finally, a supermarket project in Saudi Arabia is one of the promising and profitable projects, but you need to prepare a feasibility study for the project to study it from all aspects and know the municipality’s requirements to obtain a license for your commercial activity.