SIMONDELIVERS SUCCEEDING WITH PURE-PLAY MODEL

GOLDEN VALLEY, Minn. -- Pure-play online grocery operations that operate strictly on the Internet have had a notably checkered history, but SimonDelivers here is proving to be one of the durable exceptions."A lot of people may have written off this model, but we are making it work -- and work well," said Christopher Brown, who became president and chief executive officer of SimonDelivers last September.SimonDelivers

GOLDEN VALLEY, Minn. -- Pure-play online grocery operations that operate strictly on the Internet have had a notably checkered history, but SimonDelivers here is proving to be one of the durable exceptions.

"A lot of people may have written off this model, but we are making it work -- and work well," said Christopher Brown, who became president and chief executive officer of SimonDelivers last September.

SimonDelivers (www.simondelivers.com), which was founded in 1999 and serves mainly the Minneapolis area, reported sales of $70 million last year. In the last few months, its average order size has risen to almost $128, said Brown. On April 22, the company announced it exceeded its two millionth order -- a million of them since May 2002.

While its focus on one market has been a key part of its success, SimonDelivers expanded its delivery network last year to include Hudson, Wis., and Rochester, Minn. It now boasts an active customer base of 30,000.

Offering more than 8,000 items, the service has continually added new ones, introducing magazines in February, and DVDs, CDs and low-carb foods last fall. It has also started offering expanded family packs; more organic items; home office supplies; and expanded varieties of beer, wine and liquor.

"We've been lowering prices on some of the most sensitive items, so we can stay competitive," Brown said. "In addition, we are working with many manufacturers to offer special cross promotions that include free items and coupons. Our relationships with vendors also has cut down the number of days to get food from supplier to customer, and that guarantees our customers fresher products."

Profitability has still eluded SimonDelivers. However, Brown believes that many recent improvements are bringing the company closer to that goal, though he declined to specify when it would be reached. "We study the market very carefully, monitoring item movement to ensure that we have the right items for our customers," he said. "And we literally scrutinize all expenses and continue to put greater efforts into cost elimination and cost containment." One cost-cutting move is the planned closing of one of the two outside distribution centers, which supplement its main DC here.

SimonDelivers is also upgrading on the technology and service side. In late February, it added another server to facilitate ordering for users without high-speed connections. In January, it launched Simon's Offline Service, or SOS, making company representatives available to teach users the benefits of ordering from SimonDelivers. According to Brown, some regular customers also serve that role, throwing Tupperware-type parties where friends and neighbors find out how to use the service.

The company has attracted attention for its search engine, provided by vendor dtSearch. "When customers are looking for grocery items, they often have different descriptions like using 'pasta' for 'spaghetti,"' said Rob Wiesenberg, president of Contegra Systems, a company that partners with dtSearch. "This search engine has synonym searching, so it can accommodate interchangeable words." In addition, it accommodates misspelled words and allows consumers to use conjunctions, as in "orange juice not frozen." SimonDelivers is gaining recognition in the food industry. Ken K. Boyer, a Michigan State professor, gave it kudos for carefully developing its business model and working to educate customers on its benefits.