Convenience at a Click
Having seen other online c-stores blast into the market only to fade away a few years later, Matthew Mandell realized that if he wanted his to succeed, he would have to start small.
CollegeSnacks – Mandell's online c-store/delivery service, that launched four years ago in Washington, – began as a way to provide George Washington University students with an off-hours food and beverage outlet since at the time, no local c-stores were open 24 hours.
Today, the company – renamed DCSnacks – has gone from catering to a potential customer base of 10,000 students, to a market of nearly 100,000 prospective customers. The business has expanded to serve four square miles of the nation's Capitol – about six times the area it was serving only a year ago – and has processed close to 150,000 orders.
The company also recently extended its hours of operation by two hours on Sunday through Wednesday, now staying open from 8 p.m. to 2 a.m. From Thursday through Saturday, the online store makes deliveries from 8 p.m. to 4 a.m.
"From that initial idea, it's come so far," said CEO Mandell, who founded the business during his junior year at George Washington University. "We never expected to reach the scale that it has."
DCSnacks is a convenience store, drug store, natural foods retailer and movie rental business all in one. Growing from an initial 60 to 80 SKUs that mirrored the traditional c-store offering, the product mix now includes 1,500 active SKUs, many of them organic products that especially appeal to college students.
"Our product mix is constantly changing. We're always trying to go deeper into categories," said Mandell, noting that five to 10 new products are added to the site each week. Ping pong balls, hookah tobacco and organic jelly beans are just a few of the unique offerings.
Customers – mostly students and professionals – go online and shop for whatever items they need or crave at the time. The best sellers, according to Mandell, are Stacy's Pita Chips, Chipwich cookie sandwiches, Frito-Lay snacks and all beverages.
Once a customer submits his or her order, one of DCSnacks' 40 bicyclists delivers it in a branded backpack within 30 minutes or less. Customers can look up their biker's name and track their orders live on the Web site. Payment is accepted using cash, all major credit cards and George Washington University's proprietary campus cards.
Any order over $10 is delivered free; orders less than that are subject to a $1.50 charge per trip. The items are priced in line with competing c-stores. "We price as low as we can. Some products we're below and some we're a little above" the competition, Mandell said.
Merchandise is stored at a nearby warehouse, which allows the business to appear like any other outlet to suppliers. Mandell said at first, the supplier community wasn't overly receptive because it didn't understand where DCSnacks fit. "That has changed over time. We have shown success," he explained. The company works with local distributors since it is not large enough to buy through a national wholesaler.
To execute its business model, DCSnacks has developed a range of proprietary software that enables it to know such details as how many people are looking at a certain product versus how many are actually purchasing it. This capability has been vital to category management.
Additionally, the company's systems are equipped to track each customer's buying preferences and then suggest other items that he or she might like to purchase, according to Mandell. As he explained it: "We can put an end cap anywhere we want."
DCSnacks sends its shoppers promotional e-mails tailored to their unique buying preferences, along with surveys at least once a quarter to determine ways to serve them better. "We have a lot of brand loyalty considering we don't have a physical presence," Mandell said, noting that customers often weigh in with new product suggestions.
The company is working to create more advanced systems whereby shoppers can mark products as their favorites, as well as place orders to be delivered on a future date. "The key is making it as simple and mindless as possible," he said.
That's been DCSnacks' winning strategy over the last four years. Despite new c-stores entering its market and existing ones extending their hours, the online retailer's average transaction has increased 25 percent, Mandell said, although he declined to give specific figures.
The first year was a slow climb. Mandell recalled how he and a friend papered the George Washington University campus with flyers every week from January to May.
The biggest boost to business was a huge snow storm in March 2003, during which DCSnacks – at the time, College- Snacks – walked orders to customers' doors. "When we came back the following September, business exploded," he said.
These days, to attract more shoppers and keep sales on an upward trend, the business partners with local clubs and promotion companies to sponsor events like concerts and happy hours. The company works with its suppliers to offer customer specials, too.
Beating the Odds
DCSnacks is not the first online c-store. It's not even the first in Washington, D.C. In fact, some that have come before it have failed – the best-known being Kozmo.com, founded in March 1998 in New York City. By July 2000, it operated in 11 cities including Atlanta, Houston, Washington, D.C. and San Diego, but folded in April 2001, shortly after the dot-com bubble burst.
Urbanfetch, another online c-store/delivery service founded in 1999 to serve most of Manhattan, N.Y. and London, England, met a similar fate a year after its launch.
Unlike its predecessors, Mandell said DCSnacks has been able to sustain itself for two reasons. First, it didn't start up around the overly-exuberant dot-com era. And second, the company built everything around its competency of logistics and customer service. "We started small and because of that, we've had the opportunity to grow naturally and intelligently," he said.
The company could get bigger soon, though, since Mandell noted he's considering possibly extending the service to 24 hours as well as expanding it to other cities.
"Every morning, we wake up incredibly paranoid and look to improve," he said. "Our focus is always on peddling faster, so we can keep going further and faster and better."