Simon says rising costs unravel its delivery biz

The news struck Susan Evans like a thunderbolt.

"I called out to the office, 'Oh, my God, SimonDelivers is shutting down!'" said Evans, a local website publisher and longtime customer of the grocery delivery service.

It's true: The cheery yellow trucks of SimonDelivers.com will roll to a stop at the end of the month. After nine years, during which it survived the dot-com bust and competition from traditional grocers, SimonDelivers fell victim to rising food and fuel costs, its CEO announced Tuesday.

Sales were mostly flat at $55 million for the past few years at the New Hope-based company. Its 300 employees serve about 19,000 customers around the Twin Cities.

The epitaph may well be that while SimonDelivers won the hearts of a fiercely loyal core of trendsetting consumers, it never lived up to its promise of changing the way the masses buy groceries.

"I'm quite sure the original investors were never satisfied with the results," said George John, a professor of marketing at the Carlson School of Management.

"My guess is that they were reasonably profitable, but they were never growing as fast as the original storyline. And the storyline is that this would be transformative."

Tears and apologies

At its peak, SimonDelivers garnered 1 to 1.5 percent of the Twin Cities supermarket dollar, according to Simon Foster, the man who created the company.

A consultant at Spencer Stuart, a headhunting firm with offices in Minneapolis, Foster no longer sits on the board at SimonDelivers but has stayed close to the people running the company he founded.

"I've had better days," he said Tuesday when reached by phone at his Minneapolis office. He spent the morning in New Hope commiserating with employees.

"There were a lot of tears. It was hard. I said, 'Thank you, and I'm sorry.' I also said physical things die, the spirit and the knowledge doesn't," he said.

Company CEO Liwanag Ojala was unavailable for comment Tuesday.

An e-mail she sent out to customers on Tuesday apologized for the company's closing: "Today's economic conditions, including the spike in food and fuel costs, have forced us to make this very difficult decision."

Foster said the company struggled to find new funding, but without any growth, they couldn't find a partner. The competitive Twin Cities supermarket industry made it difficult to raise prices, even if the company paid more for its inventory. Rising fuel costs were disastrous to the bottom line.

Ultimately, there simply weren't enough customers to make it viable, he said.

"We tried everything to try to keep this alive," he said.

Some employees were let go Tuesday. Some will stay until the inventory runs out, he said.

"It was an incredible journey," he said. "I'm grateful to a lot of people."

Loyal customers

The company rode out the tough times of the dot-com bust, when similar online delivery companies burned through their start-up cash and folded. The best-known collapse was Webvan, a San Francisco-based delivery company that consumed billions of dollars of investors' cash, went bankrupt in 2001 and is now remembered as a ruinous misadventure in national retailing.

Simon, founded in April 1999, set more modest goals for itself, limiting its delivery area to the Twin Cities.

"I think the first time we sent an order over we sent a case and a half," said Phillip Brooks, president of H. Brooks and Co. of New Brighton, the produce supplier for SimonDelivers. "My father was alive at the time and he said, 'Who the heck is this Simon guy?" said Brooks. "I said, 'They'll grow.'"

Sometime in 2000, Susan Evans, said she and her husband signed up for their first weekly delivery. They were soon avid users.

They rarely shopped at a supermarket, filling out the online order form for SimonDelivers every Friday night. The groceries were left the next morning at the base of their steep driveway in Newport, a text message to her husband's phone alerting them that their groceries had arrived.

"It was simple. It was easy. They were delightful," said Evans.

She plans to shop at a nearby Kowalski's for now but hopes to have groceries delivered to her door again someday.

'Business breeds business'

Nearly two years ago the company gained a major competitor when Lund Food Holdings Inc., the parent company of Lunds and Byerly's, announced its own delivery service and website.

Sales at Lundsandbyerlys.com continue to grow, according to a company spokesman.

"As for Simon Delivers ceasing operations, it's bittersweet for us," said spokesman Aaron Sorensen. "We are firm believers that business breeds business. Simon Delivers helped raise awareness about online grocery shopping in the Twin Cities."

A voice-mail message at SimonDelivers on Tuesday said the company will continue to take next-day delivery orders until inventory runs out. No phone calls will be taken, but e-mails are accepted at feedback@simondelivers.com.

Matt McKinney • 612-673-7329