DCSnacks Conveninece Store News 2

3/23/2008

By Linda Lisanti

Innovative bicycle-delivery business on a roll with new digital marketing initiatives, earlier hours and fresh food By Linda Lisanti

“Every morning, we wake up incredibly paranoid and look to improve. Our focus is always on peddling faster so we can keep going further, faster, better.” That’s what DCSnacks.com chief executive officer Matt Mandell told Convenience Store News in February 2007.

At the time, the Washington D.C. retailer had extended its operating hours and widened its service area sixfold. There was talk of taking the business to 24 hours and bringing it to other cities as well. CSNews recently checked in with DCSnacks and found that business is booming — and not surprisingly, Mandell is already at work on the next big idea.

This year, DCSnacks celebrated its fifth anniversary and for a rare moment, Mandell took time to reflect on how the small Web-based business he founded during his junior year of college evolved into an all-in-one convenience store, drug store and natural foods retailer that’s delivered more than 250,000 orders to date by bicycle.

“I didn’t really think the business would become all that it is today,” he recalled. “I still remember walking up and down the aisles at Costco and buying $200 worth of products that would last us two weeks. Now, that would last us a very, very slow hour.”

With the way business has been growing, though, slow hours aren’t all that common at DCSnacks, according to Mandell. The company closed the books on 2007 up 30 percent in sales for the year, and so far in 2008, sales are improving by 20 percent over year-ago results.

Mandell credits a combination of factors. Being a digital retailer, DCSnacks is able to know instantly what products resonate with customers, and now, the company is using that information to improve its digital marketing initiatives, rewarding shoppers according to what items they buy and how often they make purchases.

DCSnacks is more effectively up-selling on its Web site as well. Once a customer adds a product to his cart, a series of special discounts are offered if he purchases multiple units, and a second discount is presented on an item that would complement the one in his cart. For instance, if he’s ordering ice cream, the Web site discounts whipped cream.

“The goal is to increase the number of products per delivery,” Mandell explained.

DCSnacks is also investing in advertising through Facebook and other online communities, and moving away from flyers and event sponsorships.

The business also continues to expand its product mix, with customer requests mainly driving new additions. Since CSNews’ last interview with DCSnacks, its offering has grown from 1,500 active SKUs to just slightly more than 2,000 SKUs. Mandell noted that while he strives to add about five new items each week, his goal is to keep those products that turn.

A larger variety of natural and healthful foods are finding a home on the site, and DCSnacks has a few private label baked goods and ice creams currently in development.

Like many traditional convenience stores, DCSnacks is now making a foray into fresh foods. By starting deliveries two hours earlier and entering into a strategic partnership with a quick service restaurant located three quarters of a mile away from its central warehouse, the retailer has been able to capitalize on the dinnertime market.

DCSnacks’ system interfaces with the restaurant’s system, so when a customer places a food order on its Web site, the item is made fresh at the restaurant. A DCSnacks rider is then dispatched to the restaurant and continues on to the customer’s address for delivery. DCSnacks gets a portion of the restaurant’s delivery sales plus a fixed fee.

Demand has been larger than expected, Mandell said. The partnership kicked off in mid-September, and within 10 weeks, the restaurant had doubled its delivery business. DCSnacks, too, is benefiting from higher rings. The average transaction with a fresh food purchase is roughly 30 percent larger than its average order.

The company is now eyeing other strategic food partners, including a Mexican restaurant and crêpe eatery, and Mandell said he’s considering adding daytime delivery hours to build upon the foodservice potential.

“We’re trying to end the argument of ‘Do you want pizza or Chinese?’ You could have both,” he said. “We’re looking beyond [fresh foods] someone would expect to find.”

With five years under its belt, DCSnacks is confident that it has developed a winning model, so confident in that it is taking that model and developing a software platform that will enable any convenience store to offer delivery service.

In the spring, Mandell plans to begin offering the software to other c-store retailers. For a small, upfront fee and a portion of sales, DCSnacks will set the retailer up with a Web site, help with staffing and manuals, and be available for support and consulting.

Original Context