[quinnie0930]

You're right, I missed out on the credit card fees . Please enlighten me, why do I have to pay my employees' taxes again if they already pay the tax on their check and if they make less than 26k, they'll get all of it back anyway? I won't raise the delivery cost, of course. But I will reduce the my delivery guy's wages. I just studied that, $12 is too generous for a delivery type of wage. I learned that pizza boys uses, their own car, pay for their own gas, and make minimum wages (they live off tips just like waiters and waitresses). I can hire to same pizza boys that do deliveries for me and trained them to do the shopping . Instead of paying them mimimum wages of $6/hr. I'd pay them $8/hr + tips that they'll be getting. Tell me if that salary is unreasonable?

So I'll be making $7*3/order/hr=$21-5.22=$15.78/hr/3 orders

Of all the 1,682, 373 people in population, everyone has to eat right? As I already calculated if only 0.5% of those are interested in online shopping, I'd have about 8400 customers. Considering most people shop once a week for grocery. 8400/7= about 1200 customers/day. That number might sound a lot but I do think it's very feasible. The beauty of online shopping is you get customers all around the surrounding area, not just limited to a set of customers if you were a fixed store at a certain city.

With that being said, instead of having 1200 customers/day. I'll start out with 400 customers/day as a startup. Assuming 10 hour working day, 400/10=40 orders/hr. If I make $15 on 3 orders/hr and I have 40 orders/hr, I'll make $200/hr. That's 200*10 (hrs work day)*350 days (year exclude vacation)=700,000/year.

That number does not include my own labor of course on the technical part, (or if I were to hire someone to do it), and maybe a few clerks/receptionists to handle miscellaneous thing and marketing cost. That would probably be ranging 50-200/k depending on the amount of customers I have and other factors. But once the business is establish, marketing cost should disappear and it would be just word of mouth.

Unless I'm missing something, I think grocery online model is great, and it also saves people's lives, especially the OLD people in Florida who can't drive, the handicaps, etc... If I had fundings from VC or investors and have my own grocery store, I would even benefit a lot more.


With that being said, I'll be glad to hear any cost that I missed out so I can adjust the calculations. Again, really, I'm not wrapped up in this idea as I have other on my table as well and will be happy to move on if proven wrong.

[EntrePR]

So, you don't know that employers have to match your payroll taxes? Or pay unemployment and workmen's comp insurance? Your first step needs to be reading a "Complete Idiots Guide to Business". Seriously.

So I'll be making $7*3/order/hr=$21-5.22=$15.78/hr/3 orders

Do you understand what you did wrong here? (Hint, you multiplied by three twice, see if you can figure out where.) (Hint #2, $15 is less than $21. think about why that matters)

Of all the 1,682, 373 people in population, everyone has to eat right? As I already calculated if only 0.5% of those are interested in online shopping, I'd have about 8400 customers.

You CANNOT EVER use this type of assumption in evaluating a business concept. I cannot possibly say this in strong enough terms. NEVER!!! It is never ever rational to assume you can gain ANY percentage of a market just by existing. It just does not work that way. You are mistaking evaluating the size of a market with the portion you could capture.

If I make $15 on 3 orders/hr and I have 40 orders/hr, I'll make $200/hr.

Do you even realize that you have confused your math and that $15/hr is your GROSS income? Even at $8/hr you will still lose money, although you will not listen to my explanation why so I'm not going to bother laying it out. Not only that, but delivery drivers make that much because their delivery areas are small (2-3 mile radius usually, not 40), responsibility is low and deliveries per hour can be much higher than 3. You will not be able to find and keep employees at $8/hr.

Other things you are forgetting. Demand fluctuations where employees are sitting idle. MARKETING COSTS, which are at least 20 times the 50k you are thinking. Really, everything that goes into running a business. Plus, I calculated the CC fees wrong, since I neglected to include the delivery fee charge. Please add $.43 to that $5.22.

Here is the big thing though. You can not make money on even one sale, so multiplying out how much you would make with 8400 or any number is not only moot but embarrassing for you.

Pleas, let this one go. Or, at least, go try it yourself. Randomly select $150 worth of groceries, go to two different stores to get the items (best prices, remember) and then "deliver" them to three random addresses within a 40 mile radius. Remember that you have to start from and get back to a standard starting place.

I'll bet you $100 you can't do it in less than an hour. Not that it matters since you couldn't make money at that pace anyway.

[EntrePR]

Oh, I almost forgot. Multiply all your calculations by .2, since you are confusing population with households.

[quinnie0930]

EntrePr,
Thanks for pointing out the extra costs, I appreciate it.

I did make a mistake of multiplying by 3 twice, and no I wasn't confused of the $15 from gross income and actual income, I got the $15 from $15.78 that I calculated.

Regarding the credit card cost, some companies just has new service of chargin 20 cents plus 2% of the transaction. So the credit card cost is $165*2%-60 cents= $3.9

so 15-8 (labor)-3.9-1.6(tax)=$1.5/(3 orders)/hour. That's $20/hr or or 70k/year if I were to have 40 customers/hour. Its still beneficial, just not as much as I expected.

Now, this is calculating based on the minimum amount of order. You think every single customer is going to order the minimum amount? If the same calculation applies, and if conservatively make the average price $75/order.
22.5-5-1.6-8=$8/hour/3 orders, which makes me 373,000/year

I didn't assume 0.5% of the population are going to to user online grocery store for nothing. The article that I stated the other day mentioned that 3% of the US population are using it and will TRIPLE by 2008. I use my 0.5% very conservatively. That means I have 1200 customers/day, but I was even more conservative as a starter, and make it 400 customers/day. That's 0.16% of the population. I think thats a very reasonable target as a starter.

Of course, I wont be stupid to hire a few drivers to drive 40 miles in the radius. I'll hire within 10-20 miles of the radius (I'll study the pizza boys business model and use the exact method), and hire many drivers in different areas to shop and deliver the grocery. That will give them enough time to handle 3 orders/in a hour. Of course, if the orders are big, they'll only have to handle 2, depending. But I'll take more out of the delivery money.
I'll hire my drivers based on commision type, they work and get paid, whenever there are orders, not on a hourly basis. If I want to be safe. I can raise the minimum order to $75. The number of customers might be less but I will meet my target income.

[johnbears]

quinnie0930, I like it that you are being optimisitc and not giving in so quickly. However, I must backup EntrePR here because your calculations don't quite add up. Not only that, the marketing and gaining customers will be so much harder than you think. It will take a couple of years to gain a healthy number of customers. For the first year or so you will not have enough customers and be in huge loss. Also, 40 miles radius is huge plus going to different locations to pick up the groceries is going to be a big hassle, I think your time calculation is a little off aswell. Also, there will be some hidden costs such as parking tickets, car breakdown leading to delays, prank calls leading to unsucessful delivery, etc.

I don't think you are being stupid just maybe a little inexperienced and naive.

I just think that the margins are too low for this to make any sense. Now, if you delivered pizza which cost $1 and you sell them for $5 and customers pay with cash then we can talk business. This grocery thing might work if you own a grocery store and have some margin. So lets say, out of a $50 order you make $20 gross revenue + $5 Fee then that might work out in the long term but in any case you be in loss for a couple years as it will take time to build a customer base.

Just follow EntrePR advise and go try it yourself delivering a few orders.

[EntrePR]

I almost can't believe I am hearing this. Forgetting for a moment that all your assumptions are wrong and this number isn't valid: say this out loud and see if it sounds right to your ears. "I am going to start a business where I make 50 cents on $55 in sales with the absolute best case scenario". "I am willingly risking my life's savings, time, job and sanity for a 0.91% profit margin."

Try to forget about the benefit for old dying people and how much the market will be booming. Forget about how cool you think it would be to tell all your friends that you are leading the technology revolution and how rich you will be.

Just to make your target of 70k a year, your gross sales would have to be almost 8 million. And remember, that 70k is all you have to run the entire company outside of the delivery people. Do you think accounting for an 8 million dollar business is cheap? And again, the marketing, which should be around 10% of gross sales to achieve the numbers you want. That's right, 11 times what you make will have to be paid out in marketing, forever. That number doesn't just disappear, trust me. If a customer is loyal and orders with you every week all year you will make (based again on your wrong assumptions) $26.

Well, that is pretty much all I have to say on this subject. If you do decide to take me up on my bet, please let me know. I'll even put the money into an escrow subject to video evidence. If, however you decide to risk everything you care about without spending an hour to verify your basic assumptions then I can only assume you are either clinically insane or playing some sort of joke on the forum. Either way, it's not funny.

[quinnie0930]

its not 50 cents if you read my post again, it's a $1.5. Yes I agree 70k is low assuming other costs but that's with the aboslute WORST case scenario for a $50 minimum, not the BEST case. As I mentioned earlier, if i increased the minimum sale to $75, I would make at least almost 400k/year in the WORST case scenario. Unlike you, I really don't need to impress my friends or care about being famous or whatnot as you stated. If minimum order is $75, gross sales is 10 million, I think that's little and TOO Conservative. You're talking about FOOD, (necessity, that is) and that everyone needs to be fed in the house. If you go to http://finance.yahoo.com/q/ks?s=WINN winn dixie has a revenue of 7 billion/year. I'm not making any bad assumptions here. The numbers I got based on facts that I got and I already put my numbers in a very conservative way. If marketing is done right, I should be able to make at least a couple mil/year easily.

[EntrePR]

Ok, last and final post for me. If you read your post again, it is .5 per $55, or $1.50 per $165.

Look, don't even try to convince us any more. Just go spend an hour and test your assumptions. I'm sure we're all interested to know how it turns out.

[Sam Barona]

Quinnie, you should know that I am one of the most positive contributors on this forum; however, I must concur with EntrePR. He is not being negative, but realistic.

To answer your question; primary market research will set you back between USD$6K and 10K for a small, standard questionnaire, based on a combination of online and telephone interviews and with a sample of approximately 1,000.

400 is the minimum size of any sample to be of statistical value, BTW.

Spend this much money and identify how many of those that shop online are willing to use your type of service in your test area; segment these into their respective groups (Geo, Socio economic, gender, age, etc); choose suitable media to reach your most profitable/most active segments and then find out the conversion rate benchmarks for each type of media. This should give you an idea of how many impressions you will need to make per new customer acquisition and how much it will cost to recruit new customers.

I am telling you this because some people prefer to learn by burning their fingers; so go ahead and burn them. The pain will make you more open to sound advice next time you're offered it.

There are companies that do do this and who are expanding, but you have to see beyond this. You are a new brand; no one knows you = no one trusts you; trust costs money (lots of it). Your job is not only to convince people that using a system like yours is good, but also that they should do it through what is an unknown quantity to them. You will find that after you run your first adds and publicity campaigns you will get a few customers (probably in line, or slightly above your expectations), but these are just the low hanging fruit; after that you will feel the pinch.

I have been involved in the internet business since 1994 and adviced many UK based retailers. Certain things have changed, yes; like more people using the net, people transacting more on the net, etc; and these trends are set to improve, of course; but to enter a market where the margins are so low to begin with, and at a time when customer acquisition is so costly, is simply for mad fools or those who can afford to invest money in a loss lead to strategically position themselves for when the market reaches expectations. You are neither of these.


Sam

[quinnie0930]

Hi Sam,
Thanks for your kind reply. What kind of data would $400 be covered? There seems too much pessimism for this idea. My calcuations do add up but I guess general business common sense won't work. Thank you all for your opinions.

[Sam Barona]

the 400 relates to the size of the sample, not money. The sample size is the amount of people that must be interviewed during the market research exercise for it to have any real basis in reality.

I think that your viewing the whole thing from a very rosy frame, you want to make it true, so your're looking for the evidence that will justify this. We all make this type of judgement from time to time.

Sam