I have two commerce sites, www.birdsupplies.com & www.bird-supplies.com

The first site is about 5 years old and I've put a lot of energy into marketing it. It is by far my most successful endeavor. The second site is actually only about 5 months old. I also have a brick & mortar store front which has been open for about 8 months.

I am interested in using my second site (bird-supplies) to:
1. promote my retail store
2. initiate a local delivery model for local orders processed online. Delivery within the city limits for a fee. A small verbal sampling of my customers tells me that there would be an interest in this model.

My target market tends to be a middle to upper income female, educated-professional; many instore customers say that getting to my store during our open hours is difficult. I've started promoting my pet birds online via newspaper classifieds with some success.

I'd like to know if anyone else offers a order online - local delivery model (sort of an Office Max concept). I'd also like feedback & brainstorming on how to manage the price differential for instore (which obviously has higher overhead) and how can I best promote the "local delivery" site. Plus any other issues that anyone thinks might arise.

I'm fearful that if it is the same site as birdsupplies.com but geared to local customers, search engines will penalize both sites, however, I have a certain amount of successful branding from birdsuppliess.com

I would not worry about both sites being penalized. Make content modifications so the sites are not duplicates.. change the new site 30% and link to your most important site and don't link back to your second site.