The Economics of LA's Street Food Vendors

For those of you that know LA, and for those of you who are Hispanics or Latinos, I found something interesting while I stopped to buy a delicious and refreshing Mexican style ice cream with one street-vendor around Long Beach California. Yes, one of those little merchants that sell a wide range of products, from CDs, shirts, "tenis", and DVDs, to elotes, churros, and chicharrones.

Well, even though it seems that this is an "underground" economy, in reality is a pretty complex, challenging, and most of all COMPETITIVE market. I know we live in an economy where billion dollar corporations like Walmart, Costco, and Kroger, among many others, seem to provide all those goods that people need. I know we live in an economy where billion dollar mergers and acquisitions occur not only domestically but globally. However, it is interesting to notice the economics that exist in this "underground" economy, not only because its being around for a while, but because it is expanding through the implementation of bright business strategies and the forces of the economic theories that we learn on school.

So, what is it that called my attention?
To a degree was this conversation I had with the ice cream vendor. He said, and I paraphrase, "see... its really competitive in LA. You cannot start something new because everybody will copy your idea within a week. We are too many, you can't go a whole street trying to sell something before running into somebody else selling the same thing. Thus, we now are driving outside LA to sell our goods. We move into these new neighborhoods where there is no too much competition, we sell during the day, and then we go back to LA."

This is what called my attention, the fact that these small merchants get together to move their business, after taking a look to competition, into a new market. The beauty of a free market in action.

We are not talking of whether is legal or illegal, what i am saying is that it is interesting to observe how competition reduces prices dramatically, how the difficulty of legal permits forces them to think strategically and to come up with new ideas to sell their products.

See, if a company decides to go abroad and relocate their business its call off shoring. These companies do so because they take into consideration some of the same factors that occur with street vendors. Yet, corporations have a bunch of university graduates thinking about the strategy. These are only street vendors, some with only middle school education, and yet they are implementing strategies in account to their business environment.

For example before the ice cream vendor could move to whatever neighborhood he wants to go, he needs to think about his cost, his possibilities of revenue, and the opportunity of market share. He needs to think about getting a group of vendors (partnership) to reduce the gas cost and move to areas where other competition is minimal. These vendors take into account, subconsciously, the political, legal, technological, and economic situation, and then strategically act upon it to improve their business, their lives, and their future.

This indeed fascinates me.