Small, specialty grocery stores or big-box supermarkets: Where do customers prefer to stock up on perishables and pantry staples?
According to retail industry data, the question isn’t that simple. In fact, 82% of Americans rely on both small businesses and national chains — but for different reasons.
In this blog, we’ll explore these key differences between supermarkets and grocery stores, explain why they matter, and share expert strategies to help you compete and win in this competitive market.
Supermarket vs. Grocery Store: The Difference & Why It Matters
Supermarkets are large retail warehouses that offer a full range of grocery items. You can think of them as a one-stop shop for everything on customers’ shopping lists, including perishables, pantry staples, and other items like cosmetics, clothing, and cleaning supplies.
Supermarkets are usually (but not always) regional or national chains, like Food Lion or Walmart.
Grocery stores are typically locally owned and operated, smaller in scale, and more focused on offering high-quality foods. They might provide a full mix of grocery staples or specialize in products like cut-to-order meats, organic produce, or curated international foods.
Even if shoppers use these terms interchangeably, you need to know where your business falls into the supermarket vs. grocery store categories in order to:
- Meet customers’ expectations: If customers stop by your butcher shop expecting to stock up on cereal and breakfast bars, they’ll be disappointed. That’s why understanding your niche and marketing your business accurately is critical.
- Stand out from the competition: As an independent grocery store, competing with big-box chains can feel impossible — but understanding your business’ unique strengths can help you win over customers and increase sales.
- Create an effective business plan: For new business owners, deciding whether to open a grocery store or supermarket can help you be more strategic about where to set up shop, what to stock, and how to market yourself.
Ready to take a closer look at what separates grocery stores from supermarkets? Let’s dive into six key differences.
1. Product Selection and Supply Chain
One of the most obvious differences between supermarkets and grocery stores is their size, product selection, and supply chain.
Supermarkets generally operate in huge, warehouse-style spaces, which means they can carry tens of thousands of SKUs, including multiple brands, flavors, and sizes of each product. For example, Walmart carries at least 50 different types of potato chips.
Since supermarkets are often part of larger chains, their massive purchasing power and partnerships with major distributors allow them to stock these huge quantities of diverse products.
In contrast, grocery stores specialize in carefully curating their product selections. They build relationships with local suppliers to offer products that appeal to their customers’ unique tastes and shopping habits.
Some grocery stores also offer specialty items like premade or made-to-order sandwiches and wraps, sushi, and pizza.
How Your Grocery Store Can Compete
- Use your point of sale (POS) system’s sales data to constantly adjust your product selection to appeal to customers.
- Partner directly with farms, bakeries, and other local food producers to offer unique items.
- Build a strong supply chain by partnering with multiple local grocery distributors.
- Emphasize quality over quantity by offering high-quality products that customers can trust.
2. Profit Margins and Pricing
Grocery industry profit margins are notoriously thin — but independent grocery stores and supermarkets work with different numbers.
Since supermarket chains have such high sales volume, they can tolerate small losses on some high turnover products. For example, big-box retailers can afford to offer steep discounts on high-value items like meat and steak to bring customers through the door.
Smaller grocery stores are at higher risk of cash flow problems, so they have to be careful about pricing. That’s why they often charge premium prices for premium products, like butcher-quality meats, local produce, and artisan baked goods.
How Your Grocery Store Can Compete
- Focus on improving margins in your meat, deli, and produce departments through smart inventory management.
- Consider starting a private-label brand to offer affordable and profitable alternatives to national brands.
- Offer strategic promotions such as bulk deals and meal kits to increase your grocery store’s average basket size.
- Expand your offerings of profitable prepared meals and made-to-order foods.
Related Read: How To Write a Grocery Store Profit and Loss Statement
3. Brand Recognition
When you hear the name “Costco,” you know exactly what to expect: a warehouse full of grocery and household essentials, bulk packaging, and competitive prices.
Supermarkets have the advantage of this brand recognition. Whether customers are at home or across the country, they know what to expect from a Costco shopping experience, from where to find milk to how to use the self-checkout kiosks.
Since they don’t have huge advertising budgets and nationwide name recognition, independent grocery stores have to earn their shoppers’ trust and business — but their community-oriented focus lets them maintain stronger relationships with these customers.
How Your Grocery Store Can Compete
- Launch a loyalty program to give customers a reason to rely on your store for all their grocery needs.
- Sponsor neighborhood celebrations like street festivals, road races, and sporting events.
- Use social media to build awareness for your brand, share your small business story, and highlight your offerings.
- Leverage email and SMS marketing to keep your loyal customers in the loop about seasonal arrivals and hot promotions.
4. Team Structure and Employee Responsibilities
Big-box supermarkets have the money and resources to employ specialized teams to manage each of their departments.
Employees spend their entire workday behind the butcher counter, straightening produce displays, organizing the stockroom, or checking customers out.
Grocery stores have smaller, more adaptable teams. A team member might start their day by performing an inventory check, switch to the cash register during the mid-morning rush, jump behind the deli case to help with a custom order, and finish their day by zoning displays.
How Your Grocery Store Can Compete
- Provide thorough, frequent training sessions to new and veteran employees to boost their confidence and competency in every department of your grocery store.
- Adjust your hiring practices to ensure each new employee is comfortable in a fast-paced, dynamic environment.
- Equip your team with the right technology to simplify the checkout, inventory count, and purchase order processes.
5. Flexibility and Freedom
Customers have very specific expectations when they visit a big-name supermarket — which means these chains have less freedom to adjust their product selections, pricing strategy, or store layouts.
Since grocery stores have minimal corporate constraints, they have more opportunities to experiment. For example, they can switch their suppliers, transform their floor plan, or adjust their pricing approach without disorienting customers.
How Your Grocery Store Can Compete
- Adjust your product selection with the seasons by stocking grilling essentials during the summer, pumpkin-flavored treats in the fall, and hosting must-haves during the holidays.
- Take a dynamic approach to pricing and promotions, making small adjustments and closely monitoring your sales reports.
- Experiment with unique offerings like meal kits, grocery subscriptions, and even cooking classes.
6. Technology Needs
Many national supermarkets rely on proprietary POS software and hardware. They have access to in-house teams of engineers and technicians, who constantly work to add features and fix bugs.
This means they have access to advanced features like online grocery ordering, sophisticated self-checkout systems, and in-depth reporting and analytics.
Grocery stores don’t have the same resources, so they rely on retail POS providers to keep their stores running. Fortunately, modern grocery store POS solutions include some of the same features supermarkets have access to, making it easier to provide an excellent customer experience.
How Your Grocery Store Can Compete
Want to provide customers with a supermarket-quality shopping experience? Look for a grocery store POS system that includes these features:
- Real-time perishable inventory tracking
- Online grocery integration
- Inventory and sales data reporting
- Self-checkout options
- Built-in marketing tools
- 24/7 technical support
Related Read: 5 Best Grocery Store Point of Sale Providers [Pros, Cons, & Pricing]
Supermarket vs. Grocery Store: Which Is Best?
Success in the grocery industry depends less on the question of supermarkets vs. grocery stores — and more on what you do best and how well you meet customers’ needs.
With the right product selection, technology, marketing strategy, and plan, even the smallest neighborhood market can take on big-box retail giants.
Looking for a partner to help you compete? We’ve got you covered.
For more than 30 years, IT Retail has helped local grocers like you save time, make more sales, and achieve higher profits. Our all-in-one POS solution includes all the features you need to manage perishable inventory, attract customers, and make informed decisions — plus industry-leading, 24/7 support.
Start your IT Retail journey today by generating your instant, custom quote using our Build and Price tool.
by Margaret Thacker
