STREAMLINE KEEPING IT SIMPLE

JON SPRINGER

WESTWOOD, Mass. -- Whether discussing his company, or his customers, Streamline.com founder and chief executive officer Tim DeMello keeps coming around to the same mantra.

Keep it simple.

Streamline's pitch to its customers isn't about delivering groceries, DeMello said, but rather providing a "lifestyle solution" including grocery delivery, shoe repair, dry cleaning, video rental, postage and other "about town" chores. From a business-model standpoint, Streamline deliberately steers clear of on-demand delivery and a mass customer base -- aspects of the on-line and off-line grocery business DeMello describes as too complex -- and expensive -- to be tackled effectively.

Founded by DeMello in this Boston suburb 1993, Streamline.com has expanded to Washington, D.C., and Chicago through a purchase of a similar service, Scotty's Home Market -- and debuts in Northern New Jersey this month. The service offers groceries and prepared foods delivery and other services to what the company calls "BSFs" or busy suburban families -- in each of the markets where it operates. DeMello estimates some 30 million such families exist in the United States.

By focusing only on BSFs, Streamline simplifies its business by offering the 10,000 stockkeeping units used most frequently by the group (grocery stores tend to carry three times as many products). In addition, understanding its customer's ordering patterns allows Streamline to forecast demand for its products and decrease inventory carrying costs.

The demographic is also attractive to consumer products companies, which participate in targeted marketing programs through Streamline that also drive revenue for the company. Streamline's alliances with 13 consumer products companies including Gillette, Campbell's, Kraft, Ralston-Purina and Pillsbury generated $1.2 million in revenue in 1999, according to Streamline's annual report.

Most importantly, the demographic Streamline seeks is willing to pay for the service, DeMello said. That helps offset costs of a traditional money loser for all e-commerce companies. Routed delivery, which allows Streamline and not its customers to determine cost- and time-efficient delivery, is two to three times less expansive than on-demand delivery service, DeMello said.

"I think we're a more targeted customer brand than our competitors," DeMello said. "We look at it like this -- some people shop at Nordstrom, others shop at JC Penney, some shop at Sears, some at Neiman Marcus. We don't say Streamline is best for everybody, just the target group that wants to shop with us."

DeMello's Nordstrom example is appropriate in that the upscale Seattle retailer is a 33.5% investor in the company and its co-president, J. Daniel Nordstrom, serves on Streamline's board of directors. Part of Streamline's customer acquisition strategy involves marketing to existing Nordstrom customers.

Streamline customers receive unattended orders weekly as part of a prescheduled delivery route. Though most of Streamline's Boston-area customers receive their orders in refrigerators supplied by Streamline, DeMello said it the company is now moving toward a more cost-efficient tote delivery system with its Washington rollout.

Ed Albertian, a former Star Markets and Staples executive who joined Streamline as its chief operating officer shortly after the company's initial public offering last year, said the company's biggest challenges will be acquiring customers and turning a profit. The latter, he feels, should happen in Streamline's Boston market later this year.

"We are very confident we will be profitable at some point this year. It's looking very good for us," he said. "And that's something we're totally focused on.

"An analyst told me in a recent meeting that we've got to stop pressing. We're an Internet company putting too much emphasis on profitability," he added laughing. "But we're willing to do whatever it takes."

DeMello said profitable CRCs (customer resource centers) are the key to speeding expansion for Streamline. The company said it would eventually like to be in the largest 20 markets, but profitability will speed the rollout. Streamline operates 93,000-to-100,000-square-foot CRCs in Westwood, Landover, Md., Lake Zurich, Ill. Its newest facility in Carlstadt, N.J.

Despite Streamline's efforts to distinguish itself, analysts see the company's ultimate success or failure somewhat dependent on its rivals in the industry.

"Streamline is not sure that Webvan and HomeGrocer can make their economic models work," said Barry Stouffer, an analyst for J.C. Bradford & Co., Nashville, Tenn. "But if Webvan and HomeGrocer can make it work with free delivery, I could see [Streamline] having a difficult time getting people to pay for it."

Stouffer, however, said he would have to wait and see on those results; a sentiment echoed by Ellen Baras, who follows Streamline rival Peapod for William Blair & Co., Chicago.

"A whole lot depends on the consumers," Baras said.

Streamline.com

Web address: www.streamline.com

Headquarters: Westwood, Mass.

Areas served: Boston, Washington, Chicago.

Delivery option: Scheduled and unattended, monthly fee.

Volume: $15.4 million (1999)

Expansion plans: Northern New Jersey (May 2000), Minneapolis (Fall 2000), 20 largest U.S. markets by end of 2004.

Stock symbol: SLNE (Nasdaq)

Major investors: Nordstrom Inc., Reliance Insurance Co., G.E.Capital, Intel.

Key executives: Timothy A. DeMello, founder and chief executive officer; Edward Albertian president and chief operating officer.