online grocery

1. HED 460
Internet Grocery (E-grocery)
 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

2. HED 460
Internet Grocery (E-grocery)
 E-grocery can boost loyalty and increase
market share
 E-grocery is projected to be 2% of total
grocery shopping

3. 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

4. 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

5. HED 460
S
a
v
e
m
y
u
s
e
r
n
a
m
e
&
p
a
s
s
w
o
r
d
New to Peapod?
Groceries for
your home
Groceries for
your business

6. HED 460

7. HED 460

8. HED 460
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%)

9. HED 460

10. HED 460
Regionals
 PublixDirect – small dedicated warehouses
 Palm Beach/Broward Counties 28 zip
codes plus 13 more by 2002
 2002 Atlanta and Orlando

11. HED 460

12. HED 460
Regionals
 Albertson’s
 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

13. HED 460

14. HED 460
Delivery Models
 Next day service
 2 hour delivery window
 $19.95/month. $9.95/order
 Order-on-demand (ensenda)
 60 minute delivery window
 Pre-scheduled, unattended delivery (most
are out of business)
 $35/month
 Receptacles/refrigerators

15. 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

16. 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.

17. 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

18. HED 460

19. HED 460
Preferred Service Models
29
47
28
67
23
51
23
46
0
10
20
30
40
50
60
70
StorePickup
Delivery
C-
Store/media
C-
Store/meals
All I nternet
I nterested

20. 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

21. 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-tailers

22. HED 460
Fulfillment Issues
 Product availability
 Order processing
 Delivery
 Returns
 Customer service

23. HED 460
Fulfillment
87 85 84
78 75
49
0
10
20
30
40
50
60
70
80
90
Fulfillment Capabilities Expected
Verify rcpt.
Available
Verify ship
Status
Back order
Local return

24. 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 customer’s convenience

25. HED 460
Keeping Customers in the Loop
 Staples
 Enter zip code at start of shopping for real-time
inventory availability
 Anything in-stock is available for next day
delivery

26. HED 460
Returns
29
41
53
0
10
20
30
40
50
60
Return Experience
Returned
Too much Hassle
No Effect

27. HED 460
Order Status (capability)
94.597.4
91.7
53.8
83.3
48.7
77.8
48.7
0
10
20
30
40
50
60
70
80
90
100
Confirm Back Order Shipped Tracking
Pure Play
Multi-channel

28. HED 460
Returns/Back Orders
4.3
5.1
3
5.9
0
1
2
3
4
5
6
Returns Back Order
Pure Play
Multi-channel

29. HED 460
Fulfillment Cost as % of Revenue
19
13
14
11
0
2
4
6
8
10
12
14
16
18
20
Today 2 Years
Pure Play
Multi-channel

30. HED 460
Fulfillment Challenges
 Lowering fulfillment costs
 Distributing globally
 Lowering total fulfillment costs
 Managing peak season volume
 Keeping up with order volume