A few days ago, while walking on my way home, I've heard a funny noise on the street. When I looked at where it came from, I've noticed a small truck colorfully painted and with a logo saying "Frozen food home delivery" (translated into Romanian). Needless to mention how surprised I was by the business idea. Consequently, I've started wondering whether it is really profitable and who would be interested in their services.
I had a similar experience while I was in Hungary, in some very remote area, with the difference that in that case it was a mobile ice-cream truck which sold only ice-cream.
So, coming back to my initial question: is it a viable business idea?
You might say that it must be a viable idea, otherwise I wouldn't even have seen that truck. However, the Romanian business landscape provides us with several such business ideas, which didn't have a sound business plan behind it.
In this case, let's analyze the main revenues and the costs.
Before looking at the revenue and cost side, we should review the offer. The product offer is made of: frozen meat and vegetables, ice cream.
In order to look at the revenues, we should take into consideration the customer segments targeted.
1) The eldery -who have a limited mobility. However, on the minus side, they have a weak purchasing power due to their low pensions.
2) Moms with small children - who cannot carry their children to shopping with them as the public transport is not children - friendly. They also have a medium purchasing power.
3) Upper middle class families with housekeeper - where the housekeeper is also the cook. She prefers to spare the shopping trips in order to keep up with housework and other housekeeping needs. This segment is not limited by a food budget.
4) Single young professionals - who don't have time to go shopping and rarely cook at home. They also have a high income, and food costs make up for a low proportion of their overall costs. They go out in clubs on weekend and go on weekend breaks. They are very fashionable, buy brands and drive premium cars.
Prices:
a 10% plus compared to the hypermarkets.
On the cost side, the main cost positions are:
- driver's salary costs
- truck depreciation
- food losses - due to validity time
- fuel costs
Still, much depends on the number of activity days and on the average sales.
Nevertheless, this business model can only be successful in urban agglomerations, as in small towns and villages following problems arise:
- very limited disposable income
- no demand for more sophisticated products such as frozen vegetables
- dependence on subsistence economy
Consequently, two conclusions can be drawn:
- the business model is definitely not viable outside urban agglomeration areas
- in agglomeration areas, much depends on the overhead and on the areas visited by the truck, as well as on the number of working hours and days.
Are you aware of a similar business model in your country?
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