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If you have a passion for organic and wholesome goods, you may be considering tapping into the worldwide health food trend. However, even if you have found a promising niche and the perfect location for your store, entering the retail industry in New Zealand can be challenging. In this article, we outline the key steps to start a health food store, including how to: 

  • meet some of your legal and tax obligations as a new business owner; and 
  • promote your local store to gain new customers.

Define Your Product Offering 

When you are starting a new business, you need to have a plan to help you focus your efforts in the right direction, especially if you are planning to enter a competitive sector like food retail. Your business plan is a document that explains your business idea and analyses its financial feasibility. It typically includes your: 

  • business goals;
  • overall business strategy (a summary of the critical steps to get your business off the ground);
  • current and planned team; and
  • marketing strategy and budget.

It should also include analysis of your:

  • target market;
  • competitors; and
  • finances (a high-level outline of your forecasted costs, revenue, profit and loss, break-even date, cash flow and balance sheet).

A crucial step in creating a health food business plan is to research your target market and understand your competitors to help you decide which products you should sell and how. Your market research should include: 

  • the business opportunity that you have recognised in the marketplace and how your business fits into it; 
  • your competitors, their products and pricing;
  • any cost and time efficiencies that could give you a competitive advantage; and
  • your target customers, their demographics, attitudes and behaviours. 

Once you have identified your target market and customers, you need to define your product offering and how you will stand out from your competitors. There are several ways to differentiate your offering beyond competing on price. 

For example, the popular health food store Ceres Whole Foods differentiates themselves by offering high-quality products to customers that are looking for certified organic goods produced using sustainable methods. 

Other product differentiation strategies include:

  • exclusivity;
  • variety; and
  • customisation.

Create a Focused Merchandising Strategy

Health food stores sell produce, groceries, skincare, nutritional supplements, bulk bin foods or a combination of these. You may cater to people looking for natural, organic, vegan and cruelty-free goods. Some stores also offer services such as naturopathic consultations. When defining your product offering, you may feel like catering to all of these needs to help you gain market share and maximise your profits. However, to increase your chances of success in a competitive market, you should focus your merchandising strategy. 

For example, if you find that customers shop for only a few specific things from your store, you should only offer products that meet your core customers’ needs. This will also help you:

  • reduce your inventory cost of stocking, producing, and marketing; and 
  • create a better shopping experience by making it easier for your customers to find what they want. 

Once you start gathering more sales data, you can streamline your product assortment further by:

  • eliminating low-value categories;
  • analysing your sales by type and reducing low performing choices; and
  • optimising your assortment around key price points. 

Also, remember that merchandising is not a set and forget strategy. Your product assortment should evolve to respond to trends in the market and the changing needs and wants of your customers.

Before you invest in a new trend or idea, you should test it first. No matter how much experience you have, trusting your gut feeling does not always work. Start with a small investment, and if your customers respond well to your test, shift inventory from product categories that have slowed down into trending ones.

Choose Your Location  

You may decide to have one or more physical locations for your store or to sell your products online. Your market research should guide this choice. When opening a health food store, you should choose a location where there is a high demand for wholefoods, such as areas with high-income demographics as typically your prices may be at the upper end of the market. 

Entering into a commercial lease represents a significant financial commitment for your business, so you need to review the agreement carefully before you sign it. You should consider whether you:

  • are permitted to use the leased premises;
  • will receive a lease incentive; and
  • will need to provide a personal guarantee.

Customer Service

If you sell similar products to other non-health food stores, it is crucial to differentiate yourself on the quality of your customer service. You can do this by: 

  • hiring friendly and knowledgeable staff; or 
  • providing you staff with training to ensure that they can successfully help your customers with more technical questions. 

For example, some health food stores hire qualified naturopaths, nutritionists or homeopaths. When you employ staff, you need to understand your legal responsibilities, such as drafting strong employment agreements

If you want to attract a younger demographic, it is vital to create a fun and edgy vibe for your store. From offering a seamless and more connected checkout experience to providing entertainment instore or running events to promote a sense of community, you should use your in-store experience to: 

  • meet your customers needs; 
  • attract more customers; and
  • gain a competitive advantage over your competitors.  

If you decide to have an online store, you also need to consider how you will attract customers to your e-commerce site and provide a good customer experience. Your online store should work hand in hand with your physical location.

Set Up Your Business

Before you open your health food store, you have to register your new retail business. In New Zealand, most store owners register as a:

Your choice will determine how you will pay tax on your business income and the regulations that you will need to follow. 

For example, if you operate your store as a sole trader, you will pay tax on your net profits by filing an individual income return at the end of the financial year. Companies need to have their own IRD number, file an income tax return and provide a copy of their financial records. 

There are several factors you need to consider to ensure that you select the best structure for your business. There are also other business setup tasks to complete, including: 

  • registering a name for your business; 
  • protecting your business using a trade mark;
  • registering your business with the NZBN or Companies Office and obtain an NZBN number;
  • meeting your tax obligations; and
  • getting commercial insurance for your business.

You will also need to research and understand industry-specific legal obligations, such as:

  • standard regulatory requirements for the type of product you sell; and
  • legal requirements for the use of the term ‘organic’ in labelling and marketing claims. 

Key Takeaways

From defining your product offering to choosing a location for your store, there are several essential tasks to complete when you start a health food store in New Zealand. These include: 

  • creating a business plan to help you define your product offering; 
  • creating a focused merchandising strategy to help you optimise your inventory and improve your margins;
  • deciding whether to sell your products from one or more physical locations and understand the terms of your commercial lease agreement(s);
  • determining whether you want to sell your products online and how to attract your target customers to your website;
  • deciding on a business structure and register your business;
  • getting an IRD number for your business and understand your tax obligations; and
  • researching whether you need to comply with other industry-specific regulations. 

If you need help with the legalities of getting your health food store off the ground, contact LegalVision’s commercial lawyers on 0800 005 570 or fill out the form on this page.

FAQs

How do I start a health food business?

Before you open the doors of your health food business, you need to make a series of decisions, including what products or services you will sell and to whom. You need to decide whether you will run your business from one or more physical locations, as well as online and how to attract your target customers to your website. You also have to choose a legal structure for your business and register with the NZBN or Companies Office and Inland Revenue.

How do I start an organic store?

To start an organic store in New Zealand, you need to meet the standard regulatory requirements for the type of product that you sell. When you use the term ‘organic’ in labelling and marketing claims, you need to adhere to the rules set out in the Fair Trading Act 1986. You will also need to choose a legal structure for your business and get an NZBN and tax number.

How can I sell organic products from home?

To sell organic products in New Zealand, you need to meet the standard regulatory requirements for the type of product that you sell. You must not misuse the term ‘organic’ in your labelling and marketing claims. You can sell your products from home as long as you comply with local regulations such as zoning and signage, or you can start an e-commerce store. Before you start selling, make sure you choose a legal structure, register your business and get an NZBN and IRD number.

Can I get a grant to open my new health food store?

There are various forms of help available to new businesses in New Zealand, including free advice, mentoring and grants. The purpose of government grants is to help you develop skills to run your business successfully. Some grants are co-funded, so you will need to match any funding you receive. To check what your business is eligible for, sign up with your local office of the Regional Business Partner Network.

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