Internet Grocery (Egrocery)

Very few consumers shop Internet for

groceries
1 in 5 Internet users who are the primary
household grocery shopper are interested
42% would like to spend less time
shopping for groceries
Almost 40% Internet users enjoy
shopping for groceries
HED 460

Internet Grocery (Egrocery)

E-grocery can boost loyalty and

increase market share
E-grocery is projected to be 2% of total
grocery shopping

HED 460

Webvan pureplay

Launched June 1999 Hi capital

Hub and spoke strategy
$260 mil. Sales in 2000
$1 bil. expenses
Acquired HomeGrocer.com in August 2000

Mid 2003 relaunch in S. CA??

CEO resigned ~ March/April 2001

Shut down July 9 2001
HED 460

Peapod
Launched 1989
Profit 1st Q 2001 in Chicago market
Various strategies (from supermarkets
to dedicated distribution centers)
Acquired in 2000 by Royal Ahold ($73
mil.)
Pulled out of some markets and aligned
with different Ahold supermarket chains

HED 460

New to Peapod?

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HED 460

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Tesco U.K.
Reports profit
1 mil customers/ 90,000 orders/week
90% customers reached with existing
store network lower delivery costs
National store base
Bought US GroceryWorks.com (35%)

(Safeway owns 50%)

HED 460

HED 460

Regionals

PublixDirect small dedicated

warehouses
Palm Beach/Broward Counties 28 zip
codes plus 13 more by 2002
2002 Atlanta and Orlando

HED 460

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Regionals

Albertsons
Central warehouse/existing stores
37 states: Seattle, Las Vegas, Los
Angeles, Vancouver, San Diego
Average order $110/52 items
Produce and meat in top 10 items
$9.95 deliver, $5.95 pickup

HED 460

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Delivery Models

Next day service

Order-on-demand (ensenda)

2 hour delivery window

$19.95/month. $9.95/order
60 minute delivery window

Pre-scheduled, unattended delivery

(most are out of business)

$35/month
Receptacles/refrigerators

HED 460

Fulfillment Models
Stores
Pick, pack, deliver special carts
Use existing assets
Distribution Centers/Warehouses
Hand held radio frequency
scanners to help pick products
Delivery to consumers

HED 460

Fulfillment Logistics
provider

Whyrunout.com
California based Statler Bros. stores
Purchased customer referral rights from
Webvan, webvan emailed giving options
Deliver drycleaning, film, health/beauty
More than one store ($9.95, + $1.00 each)
Deliver 2:30-8:30 p.m.

HED 460

Fulfillment logistics provider

Ensenda
Delivery service in local markets
Uses existing stock from local retailers
Delivery within 60 minutes
Couriers in 75-100 markets
$19.95 delivery charge
>sales and >order size reported

HED 460

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Preferred Service Models

51

28

23

CStore/ media

29

46

23

CStore/ meals

47

Delivery

All I nternet
I nterested

67

Store Pickup

70
60
50
40
30
20
10
0

HED 460

Financials
Few making profit
Grocery profit is usually 1-2%
Potential profit percent of up to
12%
Infrastructure and volume are the
main barriers to profits

HED 460

Future
Not dead
Partner with large food retailers
Focus on concentrated urban
areas with wealthier clients

(volume/profit)
Lack of national supermarket chain
means success of local e-tailersHED 460

Fulfillment Issues

Product availability
Order processing
Delivery
Returns
Customer service

HED 460

Fulfillment

HED 460

Keeping Customers in the

Loop

Circuit City

Local store pick-up (Express pickup)

Identify up to three local stores
Checks availability at the local stores
With Express Pickup no shipping
Pick up at customers convenience

HED 460

Keeping Customers in the

Loop

Staples

Enter zip code at start of shopping for realtime inventory availability

Anything in-stock is available for next day
delivery

HED 460

Returns

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Order Status

(capability)

HED 460

Returns/Back Orders

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Fulfillment Cost as % of
Revenue

HED 460

Fulfillment Challenges
Lowering fulfillment costs
Distributing globally
Lowering total fulfillment costs
Managing peak season volume
Keeping up with order volume

HED 460