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

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

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

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Groceries foryour home

Groceries foryour business

HED 460

HED 460

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%)

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

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

HED 460

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

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

HED 460

Preferred Service Models

29

47

28

67

23

51

23

46

010203040506070

Sto

re P

ickup

Delivery

C-

Sto

re/m

edia

C-

Sto

re/m

eals

All InternetInterested

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-tailers

HED 460

Fulfillment Issues

Product availability Order processing Delivery Returns Customer service

HED 460

Fulfillment87 85 84

78 75

49

0

10

20

30

40

50

60

70

80

90

Fulfillment Capabilities Expected

Verify rcpt.AvailableVerify shipStatusBack orderLocal return

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

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

HED 460

Returns

29

41

53

0

10

20

30

40

50

60

Return Experience

ReturnedToo much HassleNo Effect

HED 460

Order Status (capability)

94.597.491.7

53.8

83.3

48.7

77.8

48.7

0102030405060708090

100

Confirm Back Order Shipped Tracking

Pure PlayMulti-channel

HED 460

Returns/Back Orders

4.3

5.1

3

5.9

0

1

2

3

4

5

6

Returns Back Order

Pure PlayMulti-channel

HED 460

Fulfillment Cost as % of Revenue

19

1314

11

02468

101214161820

Today 2 Years

Pure PlayMulti-channel

HED 460

Fulfillment Challenges

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