SimonDelivers: Mastering the Online Game

Despite its hype and promise, the online grocery business has proved to be a famously treacherous one, with such highly financed victims as Webvan and Streamline.

Thus it was no small feat when SimonDelivers, the New Hope, Minn.-based online food retailer, announced last year that it had posted the first profitable quarter - in quarter two, ending March 27, 2005 - in the company's six-year history.

Since then, the third and fourth quarters did not follow suit. However, as a whole last year, venture-capital-supported SimonDelivers improved its bottom line by 56%, said Christopher Brown, chief executive officer. "We're getting very close. We're on the cusp of [profitability]." Sales volume for 2005 was $65 million, a 3% gain on the prior year.

As it heads toward the black, SimonDelivers has taken a number of measures to bolster its business. These include expanding its product assortment to 10,000 stockkeeping units, as well as pursuing a number of logistics and technology initiatives aimed at providing world-class customer service.

Among these initiatives: a powerful search engine for consumers at SimonDelivers.com; a sophisticated customer acquisition and retention strategy; the ability to track its drivers in real time; and the ability to pinpoint delivery times.

SimonDelivers' shoppers are taking notice of its efforts. Said one: "They have been a life-saver, time-saver and so much more for Twin Cities' residents. I have constantly been impressed with their knowledge of the food market and their constant thirst to better themselves inside and out."

For pursuing best-in-class processes to support marketing and logistics and for nearing profitability in a challenging sector, SimonDelivers has been selected as the winner of SN's Technology Excellence Award in the online sales category.

A Rifled Approach

SimonDelivers, which serves the Minneapolis-St. Paul market and environs, is currently employing the customer segmentation system Prizm, from Claritas, San Diego, to break down its customer base into 62 segments. Those segments are then analyzed for their activity on the SimonDelivers site and can serve as a platform for recruiting new customers and for retaining existing customers.

"We have a rifled approach to customer acquisition and our retention rates have increased each of the past three years," Brown said.

SimonDelivers also improved the capability of its search engine by over 25%, using a system from dtSearch, Bethesda, Md., Brown said. The search engine can accommodate "bad spelling" and can sort products by nutritional class, such as low carb, low calorie or low sodium.

SimonDelivers.com also allows shoppers to generate full nutritional information about any item by clicking on it. The site gathers recent orders into a personal shopping list that can be used for subsequent orders.

Among other IT projects, SimonDelivers switched its Web host to BearingPoint, McLean, Va., for a "faster Web experience" and improved disaster recovery, Brown said, and upgraded 80% of its servers. In addition, the retailer has upgraded its SAP software to the latest version.

Targeted Delivery

On the logistics front, SimonDelivers is installing a new warehouse management system, High Jump, from 3M, St, Paul, Minn., for the warehouse where it picks orders. Brown expects the system to deliver "better control of inbound receiving for tighter dating of perishables."

Brown takes great pride in the delivery capabilities of SimonDelivers. The online grocer offers shoppers a two-hour delivery window, which the following morning is narrowed down to a specific arrival time, accurate to within 15 minutes. "This saves us from having to take so many phone calls," he said. Shoppers are given the name of the delivery person as well.

The pinpointing of deliveries is made possible by technology from UPS Logistics Technologies, Baltimore, Md. SimonDelivers has for some time employed UPS Logistics' Roadnet daily routing tool to create optimal street-level routing for deliveries.

Last year the online retailer invested in another UPS Logistics application, MobileCast, which, in concert with global positioning system (GPS) technology, can track a driver's location, delivery status and route changes. "MobileCast gives us up-to-date information every four minutes on where a driver is," Brown said. "We feed that information into creating our time estimate."

SimonDelivers is now beginning to use a third UPS system, NetScheduler, which determines whether the service can deviate from a set schedule for a valued customer.

SimonDelivers.com also informs shoppers whether delivery trucks are slated to be in their neighborhoods in the morning or in the afternoon-evening. If the former, a shopper who wants next day delivery must place an order by 9 p.m.; if the latter, the cutoff for next-day delivery is 11 p.m.