My first business idea. Comments/criticisms?

Hey guys,

I have a business idea that I am getting serious about. I know there are many experienced business owners on this board and I wanted to post my idea so that I can get some opinions about the potential (or lack of) this idea has.

First some personal information about me: I'm going to school full time any will have heavy class loads in the future which will allow little time for me to devote to my business. (maybe 20 hours a week) However, I have more than enough startup capital ($18,000) and I believe my startup costs will be low so there should be no financial hassles to deal with. My main concern is if this idea will produce a profitable business that won't consume all my time.

Ok here is my idea: An online chocolate store that draws a customer base from the local area. I have noticed that online candy is much more expensive than the stuff you see at the checkout aisles. I believe this is because people are willing to pay much more for a candy that has some specialness to it. Maybe it's specially shaped or has an exotic taste. Prices for 150 grams of chocolate or a box of pieces range from $3-$40 online.

I want to sell stuff at the lower to mid end of that price range. At this price level I expect to retail my products for around 3 times my cost. I'll show some examples:

http://www.metrocandy.com/NONPARIELS-WHITE-CHOCOLATE

This candy is about $6 per lb. or $3 per 1/2 lb (which is about 225 grams or 4 hershey bars, the increment I think I'll sell most of my candy in) I think I could sell this candy for $6-9 per 1/2 lb.


http://www.metrocandy.com/MELTING-WAFERS-WHITE-CHOCOLATE-50LB-CASE

This candy is about $1 per 1/2 lb and I think I could sell it for $6.


http://www.metrocandy.com/CORDIAL-CHERRIES

About $4.25/0.5 lbs and I think I could sell it for $10


http://www.metrocandy.com/COCONUT-MARSHMALLOW-SQUARES-MILK

$3/0.5 lbs and I think it could sell for $10-15


Why do I think I can achieve those retail prices? Because candy on other websites is similarly priced. Also I think by adding some flare to the packaging the candy will look like it's worth more to the customer.



I plan to market my candy locally by making small sample packs with pieces of several of my candies. Each pack will cost a lot in products/packaging, probably $2-$5. To distribute them I'll stay around a high traffic area preferably near some upper-middle class eating areas. This is where I think I can find my best target demographic: middle or upper middle class folks who "enjoy" food a lot. I believe these are the guys who will be willing to spend money on candies that appeal to them. Assuming a 10% hit rate it will cost about $20-50 to get a customer. However, I believe that I'll have a high retention rate because people who develop tastes for my products will want to keep buying (hopefully they won't wander off to a different candy website though). I imagine that in a few months I'll have around 50-200 occasional customers who places orders infrequently, and maybe 10 regulars who buy stuff every week or every month. Since most customers will be local I think I can get away with sending packages via the slowest method and they will still arrive in a day or two.

So that is my idea for a profitable business that won't demand too much time from me. It will be my first business venture though, and I'm very nervous about overlooking some detail that will cripple the idea and leave me stuck with hundreds of dollars of candy in my garage. Any comments or criticisms you guys have would be greatly appreciated!

Thanks in advance

 

Thanks, this was very helpful, especially the part about creating an angle. I didn't think I'd do that because I was hoping the chocolate would sell itself after people acquired a taste for it, but it's bad to rely just on that. A marketing angle would help a lot.

Haha that wouldn't be a bad idea I get feedback on my product and you guys get free candy! What is the difference between kids and adults anyways

Thanks, and you are right that they are high (more accurately they are in line with competitors but maybe they can charge more than I can) I am trying not to compete with other web sites at this time. My niche market is my local area where I have the first chance of attracting new candy buyers.

If I paid $18,000 for a website it better shoot lasers out of the screen. How do you pay that much for a small website?

I should also note that I don't want to start with bulding the website to attract orders from online. I may consider this in the future but for now it will complicate things. I'd have to find ways to take market share away from the competitiors or create my own niche, handle a lot more customer service inquiries and shipping will become radically diferent because I'll have to offer affordable and fast deliveries and use refrigerated packaging if I don't know how the weather will be. These issues will add tons of expenses too. If I can successfully run this business with mainly local orders then I would be very happy. I envision it as a local mail order business that cuts through the hassle of managing a physical store (though I understand lose presense without one also) Once I start marketing online everything changes.

I am concerned with this model though because of what blueapples said. Maybe it just won't work at all.

 

Thanks Ike and John!

I was really excited about this idea for a couple days but ultimately it will stay an idea like the rest of them. I made this decision based on a few reasons:

1. Chiefly, I expected to do too much with too little. I wanted to start the store with a minimal amount of products and add to them as I grew a customer base. I expected to attract many more customers than what other people think is realistic. As for my reason why I thought that way, I remember reading that some products are addictive (not like drugs, but psychologically) and are not thought of as such. Women is one, food is another one. This is why I thought I could sell the candy easily and have high retention.

2. Shipping issues. Because I wanted to sell locally only I felt I could get away with regular packaging and ship my products very cheaply. You can see that other candy stores usually charge a ~$6 fee for refrigeration packaging on top of shipping charges which I think would really hurt sales. I don't know if I could have gotten away with non-refrigerated shipping but if not it would be a significant cost.

3. As mentioned my prices were pretty high. Here is my reasoning for my prices: I don't believe there is much difference between $10 chocolate and $2 chocolate. People will tell me that the $10 stuff is creamier, smoother etc. but I bet if I gave a random sample to 10 people, 9 of them wouldn't know which was which (and the true chocolate aficionados who could tell probably wouldn't buy from me anyways) As I read before the perceived value of an item can be more important than it's actually value. If I could have gotten away with selling low grade chocolate for higher prices then I would have had something here. I'm still not convinced that I couldn't have pulled it off but my other issues with this business will keep me from testing it for now.


Now I'm considering affiliate marketing which I think is more of a shotgun approach to online business. Basically I get around a $10-$50 commission selling insurance, pharmaceuticals, instruments etc. through cheap web stores. I like this idea more because though it has less upside, it has far less downside too (I won't have to handle most of the customer service and my only expenses are the web site, SEO and advertising)

So again thanks for the feedback, you guys probably saved me a lot of money (or maybe you cost me a lot? haha)