Webvan.com Webvan.com

• Case Presented Case Presented By:By:

• Aileen Aileen OganesyanOganesyan

• Valerie ClarkValerie Clark• Farooq Sattar Farooq Sattar • Veasna ChuonVeasna Chuon• Rolando Fuentes Rolando Fuentes • Tim Campbell Tim Campbell • Arthur Paronian Arthur Paronian

IntroductionIntroduction

--Founded By Louis Borders-Founded By Louis Borders

--Set out to create a full service -Set out to create a full service online retailer that offered the online retailer that offered the customers a convenient and customers a convenient and affordable way to shop for affordable way to shop for groceries and other items onlinegroceries and other items online

Introduction Cont.Introduction Cont.

- In April of 1999, the - In April of 1999, the company changed its name company changed its name to Webvan.to Webvan.

-Launched it’s operations in -Launched it’s operations in the San Francisco Bay Area the San Francisco Bay Area in June 1999.in June 1999.

-Built vast infrastructure -Built vast infrastructure containing 330,000 square containing 330,000 square foot warehouse to effectively foot warehouse to effectively store and deliver store and deliver merchandise to customersmerchandise to customers

Introduction Cont.Introduction Cont.

-Webvan used hub-and--Webvan used hub-and-spoke model, similar to spoke model, similar to FedEx and UPS for delivery.FedEx and UPS for delivery.

-Customers ordered online -Customers ordered online and chose a 30 minute and chose a 30 minute window for delivery.window for delivery.

-At one time featured -At one time featured 20,000 products, including 20,000 products, including prepared meals for sale.prepared meals for sale.

• Consisted of Consisted of creating a creating a sophisticated and sophisticated and highly automated highly automated information systems information systems centered around centered around warehouses.warehouses.

Webvan’s Business ModelWebvan’s Business Model

Industry BackgroundIndustry Background

• Offline market $550 billion Offline market $550 billion • Plus home supplies $750 billionPlus home supplies $750 billion• Online sales $234 million in 1998Online sales $234 million in 1998• Grocery shopping is not a Grocery shopping is not a

consumer favorite.consumer favorite.

Competitors Competitors

• Peapod Peapod • Streamline Streamline • Net grocer Net grocer • Home Grocer Home Grocer • Albertson Albertson • Others Others

Operational keys for Operational keys for Webvan's success Webvan's success

• Less expensive and Compare Less expensive and Compare prices prices

• Provide perishable goods.Provide perishable goods.• Digitized grocery orders.Digitized grocery orders.• Cost efficiency Cost efficiency • Time efficiency Time efficiency

Operational keys for Operational keys for Webvan's success (cont)Webvan's success (cont)

• Operated from a single 330,000 Operated from a single 330,000 square-foot distribution hubs in square-foot distribution hubs in Oakland, California, carrying Oakland, California, carrying 18,000 SKUs 18,000 SKUs

• Software development and Software development and administration.administration.

Environment key to success Environment key to success for Webvanfor Webvan

• Publicized ventures in e-business. Publicized ventures in e-business. • $1 billion deal between Webvan and $1 billion deal between Webvan and

Bechtel corporation to build Bechtel corporation to build distribution centers in 26 U.S cities by distribution centers in 26 U.S cities by 2001. 2001.

• Save consumer time and money. Save consumer time and money. • 70%Repeat customers. 70%Repeat customers. • 30 minutes window delivery.30 minutes window delivery.• Friendly customer service than Friendly customer service than

competitors.competitors.

Environment key to success Environment key to success for Webvan (cont)for Webvan (cont)

• No cost for delivery. No cost for delivery. • No cost of membership. No cost of membership.

Target market for Target market for WebvanWebvan

• Metropolitan areas such San Metropolitan areas such San Francisco Bay, Atlanta, Georgia, Francisco Bay, Atlanta, Georgia, Chicago and Seattle Chicago and Seattle

• New Technologist.New Technologist.

• Time Starved Shopper.Time Starved Shopper.

• Price Insensitive Shopper.Price Insensitive Shopper.

Webvan's value Webvan's value proposition proposition

• Extensive line of grocery and non Extensive line of grocery and non grocery items for comparable grocery items for comparable prices. prices.

• Borders hoped that he could Borders hoped that he could eventually offer all of this value to eventually offer all of this value to consumers, without charging high consumers, without charging high prices, membership fees, or even prices, membership fees, or even delivery fees. delivery fees.

Webvan's value proposition Webvan's value proposition (cont) (cont)

• $100 in order to meet its forecasts.$100 in order to meet its forecasts.• Webvan believe that same day Webvan believe that same day

distribution system can position them distribution system can position them as a preferred on line provider for as a preferred on line provider for many consumer products that can be many consumer products that can be delivered to the home. delivered to the home.

• Oakland warehouse would break Oakland warehouse would break even in as few as 60 days. even in as few as 60 days.

Conclusion Conclusion

• Webvan believes that their same Webvan believes that their same day distribution system can day distribution system can position them as one of the most position them as one of the most preferred on line providers for preferred on line providers for many consumer products, many consumer products, making them a nationwide making them a nationwide household name in the future.household name in the future.