SimonDelivers expands locally and considers a second major market
Minnesota-based online grocer SimonDelivers is expanding beyond its Twin Cities base into five satellite markets as far away as Wisconsin preparatory to a possible geographic expansion into a second major market in the future. Golden Valley, MN-based SimonDelivers extended delivery services last week to Faribault and Northfield, MN, and says it will add Rochester – some 70 miles from its Twin Cities warehouse – and St. Cloud, MN, as well as Hudson, WI, later this month.
“These are satellite markets, so we don’t have to build any new infrastructure to expand into these areas,” says CEO Simon Foster. Currently, SimonDelivers, founded in 1999, serves a radius of about 30 miles and some 55,000 Twin Cities households, with 99% of orders coming in online at SimonDelivers.com, though phone ordering also is available. “It’s an important step in our strategy of widening the circle of distribution we can serve, and it also gives us an opportunity to gauge customer appeal in markets we’ve not been in at all,” Foster adds.
Foster says outreach to new customers in the satellite markets will depend on word of mouth and direct mail. Because the markets have slightly different pricing structures, the company will have to build out separate pricing files to serve the new locations, but otherwise does not expect to have to add bandwidth, sales reps or drivers to expand delivery services for now. Success in the satellite markets will grow the customer base by about 10% to 15%, Foster says.
Because SimonDelivers’ distribution center operates at a weekly volume equal to approximately 8 small grocery stores and 3 to 4 medium-sized ones, it’s able to negotiate directly with growers and large brokers, which cuts steps from the distribution chain. “We also turn inventory very quickly. The net effect is that where it might take a few weeks to get inventory from a broker through the supply chain to the store where consumers can buy it, it takes us about a week,” says Foster.
SimonDelivers will use the same controlled route delivery model in the satellite markets it used to launch services in the Twin Cities. Under that system, unlike on-demand delivery, consumers can select a delivery time from regular routes scheduled in different neighborhoods on different days, with a choice of two or three days a week. “By concentrating the days on which we are in the neighborhoods,” says Foster, “we are able to expand profitably into that market.”
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