Although Americans spend about 10 percent of their income on food, supermarkets and grocery stores don't make much off of each customer's bill.

However, some items in a supermarket can have a huge margin. Overall, competition is so stiff that many supermarkets employ marketing gimmicks to attract customers and gain a competition edge in customer service. The average supermarket has a profit margin of about 1 percent, according to Stacey Vanek-Smith of National Public Radio. Some experts suggest this figure might be as high as 3 percent. Either way, supermarkets are a volume business.

The extremely thin profit margin in the grocery business comes from the large amount of competition due to the low barrier of entry into the market. Thus, a grocery store must make up for its low margin by selling large quantities of product. A grocery store can see a huge gap in profit margin on certain items compared to their overall profit. For example, supermarkets usually have about a 70 percent markup on batteries and other impulse buys like magazines because the business wants to take advantage of the rash decision to purchase these items.

Huge differences in mark-up sometimes occur within the store.

For instance, gourmet cheese often costs up to 50 percent more when purchased in the deli section than in the dairy section, according to Aaron Crow of DailyFinance. Supermarkets often have sales to draw in customers. The store might offer a common staple, such as pasta, at a low margin or even at a loss, on the hopes that customers do the rest of their shopping in the store and purchase items with a higher margin.

They also usually offer cheap cuts of meat to compete with large national chains, such as Wal-Mart, Conn's and Ralph's, whom can offer lower prices on most items.

Before an entrepreneur opens a local grocery store, he should run an analysis on the area, such as listing competitors like convenience stores.

Other important factors include the spending habits and spending power in the area. Consumers in a community with a high income might be more willing to spend a premium at a local chain for better service and niche items than they could find in a chain store. In general, "mom-and-pop shops" and supermarkets need to use loyalty programs and other ways to make a connection with the customer to build a base, such as emphasizing service with personal shoppers, suggests Vanek-Smith.

Russell Huebsch has written freelance articles covering a range of topics from basketball to politics in print and online publications.

He graduated from Baylor University in with a Bachelor of Arts degree in political science. Skip to main content. Identification The average supermarket has a profit margin of about 1 percent, according to Stacey Vanek-Smith of National Public Radio.

15 Ways Supermarkets Trick You Into Spending More Money - Business Insider

Features A grocery store can see a huge gap in profit margin on certain items compared to their overall profit. Marketing Ploys Supermarkets often have sales to draw in customers.

The secrets of the supermarket - money - business | ydelery.web.fc2.com

Considerations Before an entrepreneur opens a local grocery store, he should run an analysis on the area, such as listing competitors like convenience stores.

References 3 National Public Radio; Rising Prices a Supermarket Challenge; Stacey Vanek-Smith; April The Motley Fool: Profit Margin DailyFinance; Biggest Grocery Store Markups: The Worst Deals in the Aisles; Aaron Crowe; February Resources 1 State of Illinois Chamber of Commerce: Grocery Store Start-up Profile.

About the Author Russell Huebsch has written freelance articles covering a range of topics from basketball to politics in print and online publications. Suggest an Article Correction. More Articles [Store] How to Start Up a Mini-Grocery Store [Gross Profit] How to Figure a Gross Profit for a Grocery Store [Grocery Store] How to Operate a Successful Grocery Store [Profit Margin] What Is a Good Retail Profit Margin? Also Viewed [New Grocery Store] Necessary Items for Starting a New Grocery Store [Profit Margin] What Is a Reasonable Profit Margin?

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