Saturday, August 13, 2011

Startup company tries to deliver big on idea

This startup company’s ad slogan says volumes about its appeal to college students: “We shop so you don’t have to.”

Rising college junior Jonathan Murrell has worn the diverse mantles of business school student, Belmont University tennis player and now CEO of a startup food delivery company,

Operating from his parents’ home in a gated community in Williamson County, Murrell and two partners aim to ship care packages to college kids’ front doors on campuses, first across Tennessee and then in other states. His bedroom/warehouse is crammed with inventory these days as prepares for the late August move-in dates on campuses from Nashville to Clarksville and beyond.

Sales are tiny at this point for the 1-year-old operation. But the idea could be big. Murrell has researched competitors — one similar outfit is dubbed — and he thinks there’s room for his firm to grow. The idea is this: Students (well, actually it’s parents) generally spend more than necessary on snacks, fast food and energy drinks during a school year.

So, instead of dropping into a convenience store to make expensive impulse purchases, why not get a week’s or month’s supply of snack foods, packaged meals and drinks delivered to campus at a fraction of the cost.

Advertising is targeted at parents who pay the bills. Murrell and company think the idea could grow into a $2 million-a- year business in a few years, although he acknowledges “that’s just a number” on a business plan at this point. For now, the goal is to hit $70,000 to $80,000 a year in sales over the next two years.

Murrell talked about his brainchild with Randy McClain, business editor of The Tennessean, last week.

Who are your competitors? How can you make a dent in this field of feeding college students?

There are a handful of dorm-room product companies out there and one other company that specifically delivers food to campus. It’s called Dormzy and is based in Columbus, Ohio. It started a year before we did. Its CEO is a recent college graduate in his early 20s. We both operate on the same principle. Kids are paying too much for these items on campus, moms are sending care packages from home and it’s just too much hassle.

Indirect competitors are more varied, and that includes Amazon, which has expanded its grocery selection. But here’s why we’re more convenient. Especially with Amazon, most of the items people want to buy have to be bought in bulk, massive amounts. And college students don’t need that; they don’t have the room to store stuff.

With us, you can order one “cup of noodles” in a shipment, let’s say, or one Granola bar instead of a box of 96. We sell completely individualized packages. We offer choice. You can fill a box with coffee or just Butterfingers. It doesn’t matter to us.

How do you ship to campus?

We ship via UPS. Right now we drop off at UPS every day because our volumes are small. But eventually we’ll be scheduling pickups with them. Right now, we are low in inventory because it has been summer. We’ll start marketing and sales again in earnest within this next week.

What campuses are you targeting now?

Lots of colleges have contracts with big distributors to deliver food to their own cafeterias and campus stores. So, we’re not officially licensed at any school. We ship orders via the campus post offices to Belmont University, Lipscomb, others — and we’ve shipped to some students in California, Massachusetts, Missouri and Texas. But no single school has really taken off yet.

Coming this fall, from Aug. 21 to Aug. 30, we have campus events and vendor fairs planned at Middle Tennessee State University, Austin Peay, Belmont, UT-Martin and Martin Methodist College. We plan to focus our energy on Tennessee schools and a few other schools within a four- or five-hour drive of Nashville.

We want to try different types. MTSU is a big commuter campus, but Martin Methodist is smaller. Campus events will feature us giving out pamphlets and collecting email addresses to build a database. We want to build brand awareness. We’ll have an iPad and show students our website (, show them how it works.

Is the goal to expand beyond the borders of Tennessee at some point?

The goal is to advertise online to reach schools in other states, but we’ll also be recruiting on-campus representatives to market for us. We’ll get a connection on campus and let them handle events there. The reps will get a percentage of sales from their campus. We won’t physically have to be at Texas State (in San Marcos, Texas), but we can distribute materials there. We are looking at UT-Chattanooga and the University of Kentucky right now and a handful of others.

What size university are you likely to target? Are bigger schools with lots of students the best, as I’d guess?

One of the problems with the big state schools is that they have such extensive cafeteria systems — and on-campus food plans — that it may be tough to win sales. Freshmen at a lot of schools have to get meal plans and they’re even hard-pressed to spend all the money on their campus (debit card).

So, we may be better off targeting smaller schools with less elaborate meal plans or with a limited cafeteria system. One of our methods will be to offer some items that are harder to find in a small town environment. We have specialty drinks and a variety of power bars — things that may be tough to find where there isn’t a Whole Foods supermarket on the corner.

Any plans for off-campus sales at some point?

One of our other targets is seniors as they’re graduating from college. Right now, our product offerings are fairly limited, but it’s almost enough that a young bachelor coming out of college could order from us whatever they need to fill up a pantry.

We’re also moving to offer enough personal care items, shampoos and the like, that a person right out of college working 9 to 5 can get what they need delivered from us and skip shopping at the store altogether. We have drinks that don’t have to be refrigerated; microwave meals, soups; chips; power bars; lots of nonperishable things. We might step into bread and bagels at some point after our daily volume becomes more predictable. We also have 20 or 30 specialty health food items that we haven’t put online yet for orders, but we are planning to add them as volume grows.

How do you buy inventory now with such a small volume of initial sales?

We’re buying merchandise at Sam’s, Costco and sometimes if there’s a big discounted sale on Amazon. Even with that our gross margins are about 35 percent at this point, and that’s basically with us matching the grocery store price of a Publix with the convenience of basically delivering to your doorstep. Packages are delivered to the campus mail center, actually.

What were your start-up costs for this business? Obviously, overhead is low since you’re operating out of your home.

We started with $6,000; the three partners put up $2,000 apiece. We used about one-sixth of that on promtional materials, logo, stickers, banners and other gear. We spent about $1,500 on initial inventory — cereals and other items — and about $800 on legal costs to set up our limited liability corporation. The website I did myself. We entered entrepreneurship competitions at both Belmont and Lipscomb and won a total of $5,500 by finishing first and second place, respectively. We’ve put that into operations.

How did you use that new cash?

We used the new money to upgrade our website, redesign it and get a new logo. The website now allows easier tracking of customers and it looks more professional. That project should have cost anywhere from $5,000 to $10,000, but we did it for a fraction of that cost. I hired designers in India; guys in the Philippines to do the coding; we had the logo designed in Dubai. We outsourced everything and I oversaw it. I used (an online outsourcing site) to parcel out the work.

Describe your core customer.

It’s all over the map. This shipment going out today (points to boxes on a nearby table) is a mom sending 60 Gatorades to her son who started school this week. Most of our orders so far come from parents buying for their children. Our advertising will target both students and the parents, and one will tell the other about us.

What about your pricing? What’s a typical sale at this point?

The average order at this point has been $33 per shipment. We’ve had everything from $10 orders up to $200. If you spend over $45, it’s free shipping. At that price, you’re saving money over what you’d spend in an on-campus store for the same items.

We’re anticipating that a moderate-use customer would order from us four times a year. These are nonperishable items; so you can order quarterly for the most part. We also will market at exam times; as we offer more items, we expect the frequency of orders to increase.