Pet food delivery

[elanpro43]

I live in an urban area where 3 out of 10 people have pets. I own a cat. Most of these people shop for the pet food at the local pet store. My city has a population of 6.7 million people, thus if we consider an average family size of 5 we get 1.34 million households, out of which 0.4 million (3/10) have pets.

Amazon also delivers pet food, but it isn't same day delivery. Delivery usually takes 3 days. Amazon also charges delivery fees.

A local pet store offers me 6% discount on each purchase. I want to test an idea of pet food delivery to houses in my city. If I could take the 3% as my margins and offer the rest of 3% to customer in the form of delivery charges (which basically means that the customer gets the product for retail price, no discount but no delivery charges either) and deliver the product to their house within a day, could this be a viable business?

Note: I'd hire a guy to make deliveries and fulfill daily orders on a bike. The delivery boy's salary and fuel costs will come from the 3%. I'm also ready to give up my part of the 3% initially as I build up traction.

Edit: I live in India where my only competition is Amazon and where cost of living is low. I'd have to pay only $120 per month to delivery guy and that would be fair pay.

Edit 2: would like to add some numbers to the game->

If out of the 400000 households that own a pet and spend $10 bucks a month on pet food, after fully scaling the business in my city (would take 4-5 months of setup and marketing) if I would be able to get 10% of these to order from my website/call service, I'd get 40000 households X $10 per month = $400000 of GMV per month. Out of which my margins excluding supply chain costs would be 6-8% = $24k - 32k.
Which means I would be processing 40k orders a month and 1.3k orders per day. Let's say a delivery boy could make 50 orders a day, I'd have to hire 26 delivery boys and pay them each $120 per month = $3120. I am left with 24k - $3120 = $21ish k excluding the fuel costs. My city is a 100 km wide, let's say a delivery guy has to travel each day across the city. Petrol costs $1.2 a litre and Indian bikes have a mileage of 60 km per litre. A delivery boy would thus consume 1.66 litres a day which would add up to 50 litres a month. 26 delivery boys would consume 1300 litres of fuel per month costing me around $1560.

Thus ultimately, I'd be left with with 19-20k of margins per month. Let's take out some additional burn like Marketing costs, advertising on the local radio, newspapers, online advertising, supply chain costs, returns, customer support, bike maintenance, etc. I'm betting those won't go beyond $9k per month. I'd be left with a healthy margin of $10k per month.

This math is of course if everything adds up according to the plan.

This would be an MVP of sorts and I am willing to scale this model with other things and to other cities if this works.

 

[farmert]

@elanpro43 y'all went at this at the wrong angle. pet food is a necessary commodity. You have a schedule to fill. So you want to sign people up on your biweekly route to receive a 2-week supply. When delivery boy drops them off, have him passing out flyers of all the cool pet toys you also will sell them.

Also bump that slick price up $0.50-$1.00, maybe even $2.00 if you can. you don't have to match the retailers.

That delivery boy realistically needs to make 10 deliveries a day to cover himself and make you any decent recurring profit. But at $10.50/delivery you only need 5 deliveries a day for that same profit. If you can get it up to $12.00/delivery, the kid only needs to make 2 deliveries a day.

Now you start selling dog toys for a profit margin that goes straight to the bottom line. Maybe pay a small incentive to the kid for helping sell them. idk.

Also, can the kid wash dogs? sounds like easy profit to me, whatever he makes from the dog wash just pay him 1/3 of it and you'll be a better boss than most in America with that ratio.

Those 3 products lines set up and figured out, with a website advertising it all, you could just start franchising delivery boys in different neighborhoods. Target one neighborhood at a time and eventually word of mouth will spread your business, if it's successful.

 

[elanpro43]

@farmert Good feedback. Thanks!

 

[iamjoannaa]

@elanpro43 3% of a $20 bag of dog food is 60 cents. If you’re in the US minimum wage is 7.25 so that’s 12 deliveries an hour (at that price point) to float.

Your value prop is convenience - not price. People pay a premium for convenience. Don’t sell yourself short. I use DoorDash because the food comes to my house, it’s more expensive and I’m okay with that.

 

[elanpro43]

@iamjoannaa I am from India. A pet food bag costs $10 and I get 60 cent discount on it. I could bargain for more and get to something 9ish% if I scale. Monthly labour would cost something like$120-150 per month.
Still think the margins wouldn't work?

 

[iamjoannaa]

@elanpro43 You tell me. When you do the math is the realistic profit worth the work?

 

[elanpro43]

@iamjoannaa Yes it is. Let me explain this.
If out of the 400000 households that own a pet and spend $10 bucks a month on pet food, after fully scaling the business in my city (would take 4-5 months of setup and marketing) if I would be able to get 10% of these to order from my website/call service, I'd get 40000 households X $10 per month = $400000 of GMV per month. Out of which my margins excluding supply chain costs would be 6-8% = $24k - 32k.
Which means I would be processing 4k orders a month and 1.3k orders per day. Let's say a delivery boy could make 50 orders a day, I'd have to hire 26 delivery boys and pay them each $120 per month = $3120. I am left with 24k - $3120 = $21ish k excluding the fuel costs. My city is a 100 km wide, let's say a delivery guy has to travel each day across the city. Petrol costs $1.2 a litre and Indian bikes have a mileage of 60 km per litre. A delivery boy would thus consume 1.66 litres a day which would add up to 50 litres a month. 26 delivery boys would consume 1300 litres of fuel per month costing me around $1560.

Thus ultimately, I'd be left with with 19-20k of margins per month. Let's take out some additional burn like Marketing costs, advertising on the local radio, newspapers, online advertising, supply chain costs, returns, customer support, bike maintenance, etc. I'm betting those won't go beyond $9k per month. I'd be left with a healthy margin of $10k per month.

This math is of course if everything adds up according to the plan.

This would be an MVP of sorts and I am willing to scale this model with other things and to other cities if this works.

 

[neco]

@elanpro43 Be careful with top-down analysis (400k houses, capture 10%,etc). It's not the way you actually build a business. You need to do this analysis bottom up. You now have 0 customers. How do you get 1? How do you get from 1 to 100? How do you get from 100 to 10,000? How much money would each step cost? How much time would it take?

You're in a commodity market - local pet stores, supermarkets, Amazon. What could make customers switch to your service? What one thing can be better by going to you? If it's just same day delivery (vs Amazon doing three days) or just 3% lower prices, would that be enough to convert thousands of customers?

Not trying to rain on your parade, I do like your plan and it seems like a good niche and relatively low risk to start trying it, just suggesting trying to get the value proposition and strategy clear before you commit.

 

[elanpro43]

@neco I understand your concerns. I'd initially start with just one delivery boy and see how things work. I'd adopt the door dash model of starting up. They have a wonderful video of starting minimally.
The 3% margin would be just in the beginning, to check if the model works, if people order. Once I get validation, I'd apply for a distribution license in my city and get healthy margins. Thank you for the advice!

 

[lena_the_lena]

@elanpro43 I'm reading your replies to all the comments and questions and it seems you've already made up your mind and seeing if we're all on board too. Good luck man! I think a subscription model would work best for optimization and upsells, and you're also able to buy direct from manfucturers and eventually white label your dog food when you hit the big bucks. Cheers

 

[elanpro43]

@lena_the_lena No that's not the case really. I'd like to apologise if my comments gave you that impression.
I'm looking for some validation, feedback, skepticism, and some additional products/services/ideas I could do with this.

 

[sincerelykelsay]

@elanpro43 Seems like you've put a lot of work into thinking up the numbers, which is great. I'd think now of the early/worse case numbers, and how much money it might cost you whilst you start off. For example, you'd need to buy and store the food, marketing, pay delivery people that may not be working, etc.

 

[elanpro43]

@sincerelykelsay These numbers we're just top of my mind. I wouldn't store this to avoid the warehouse and supply chain costs. I'd (at the beginning) only buy it from the local discounted store and deliver it on the same day of the order.

 

[reluctantasr]

@elanpro43 Bro. You want to make $10k a month servicing 40,000 customers? GOOD LUCK WITH THAT.

You need to listen to some advice here.

 

[elanpro43]

@reluctantasr I'd surely need some luck, thanks!

 

[reluctantasr]

@elanpro43 You missed my point.

Every extra customer means more headaches for you. If you aren't scaling your profit with that, it's not worth it.

You are looking to profit 25 cents a customer a month. That sounds like hell on earth.

IMO figure out a different slant to get you to 400 customers paying you $25 a month in profit. Same outcome with way less overhead, liability, employees, and hassle.

/mytwocents

 

[mikec57]

@reluctantasr He's not here to listen.

 

[randy3]

@elanpro43 Your starting place is your crucial flaw.

Here's the tried and true method to see if a startup works:

1. Take "400,000" and bag it up in a poop bag. By the way, if you have a means to offer those that's a value add. People will use them if rich people use them.
2. Now identify the rich people. You probably know where they live. Start a campaign there, put tasteful, decent looking business cards on their car windows with your phone (or whatever app rich people use to text) and email.
3. You're going to start getting calls, and you're going to have to have someone on standby to deliver if you are not doing it yourself.
4. When the amount of calls means you have the capital to hire more people your startup is working.

 

[nyli3]

@elanpro43 I usually just buy pet food from Amazon that will last for two months (2 bags, about 40 lbs if I remember correctly). I just don't think I'm usually in much of a rush to get food delivered asap, since usually the next shipment is made a week or so before I run out.

 

[freckles827]

@nyli3 Was going to say the same thing. I have a giant bag set to come through Amazon Prime once a month, and that’s usually about 2 weeks sooner than I’m actually in need and I have to move the delivery out. Not to mention, even if I didn’t have a recurring order set up, I have to look in the food bin twice a day to feed the dog... I can tell a week before that it’s getting low.