Plans Expansion to Second City

May 07, 2002

According to a report on the Internet Retailer website, is preparing to expand into a similarly mid-sized second city with the $21.3 million in new financing it obtained in February.

Expansion plans will follow the same strategy that has made the Internet grocer profitable in the Minneapolis area. That model is built in part on one-stage distribution, in which the company cuts out middleman brokers wherever possible to supply its warehouse directly from farmers. That reduces both cost of goods and fulfillment time. Shoppers who buy produce from get fruits and vegetables that are up to a week fresher than what they’d find in a typical supermarket, says Chief Financial Officer Chuck Karpinske. That difference may be seen in SimonDelivers’ higher percentage of sales from fresh produce than the typical grocery store.

The rest of its strategy is controlled route delivery. “Companies like WebVan and Streamline started with an on-demand model, kind of like pizza delivery, only a bit more complicated,” says Mr. Karpinske. “Those models weren’t able to get enough orders per day and per time to get the delivery costs down.” Alternatively, SimonDelivers gets web shoppers to commit to a regular day and time of delivery, allowing them to choose from up to four days and two to three time slots per day. Aggregating deliveries in a more compressed time frame, and knowing about them in advance, allows SimonDelivers to keep delivery costs down. The company fulfills orders from its own 150,000-square-foot warehouse to a customer base of about 50,000, more than half of whom order at least twice a month, estimates Mr. Karpinske.

Moderator Comment: Has SimonDelivers gotten it right
where Webvan and Streamline went wrong?

More than $21 million in new financing is riding on the
bet that it has. [George
Anderson – Moderator

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

Be the First to Comment!