Walt Baker Tracy Chen Michael Falter Jenny Flanders Webvan Walt Baker Tracy Chen Michael Falter Jenny Flanders

Agenda Business Overview - Jenny Business Model - Michael Competition - Tracy Demo/Challenges - Walt

Webvan Background Founded December 1996 Headquartered in Foster City, CA Began commercial operations in May 1999 Chairman Louis Borders Co-founder of Borders Group Bookstores CEO/President George Shaheen Former head of Andersen Consulting

Webvan Business Overview IPO in November 1999 Market Capitalization - $4.89 billion Price/Sales - 847.9 FY 1999 Revenues - $13.3 million FY 1999 Losses - $144.6 million Active Customer Accounts - 47,000 (12/31/99) High investment, no profits through FY 2001

Webvan Stock Performance

Webvan Stock Performance Current analyst consensus - Strong/Moderate Buy

Retail Grocery Industry $450 billion in 1998 Low operating margins (6%) On-line sales $539 million in 1999 $10.8 billion by 2003 Industry Consolidation - (Economies of Scale)

Traditional Grocery Retailer vs. On-Line Retailer Pros On-line goal - 16% margins One warehouse vs. 25 retail outlets Disintermediation of retailer Cons Purchasing power of large grocery retailers

Traditional Grocery Distribution Channel Producer Wholesaler Retailer C C

On-Line Grocery Distribution Channel Producer Warehouse C C Internet

Traditional vs. On-Line Operational Comparison

Webvan vs. Traditional Grocery Store

Value Proposition Convenience 75 minutes per shopping trip 125 hours per year What is dollar value of customer time savings? $20/hr * 125hrs = $2500/year Price - 5% less than traditional retail Elimination of Retail Costs (check out clerks, stockers, capital expenditures) Wide Selection (twice the selection of traditional grocery outlets) 350 cheese 700 wines 300 fruits and vegetables Live lobsters Personalization (customized shopping list, 80-85% is replenishment)

Business Model Warehouse model Selection Overbuild Fulfillment Network, Last Mile Selection Perishable and non-perishable groceries Non-prescription drugs Same day delivery, 30 min delivery window Free delivery for orders over $50, $4.50 charge for others Revenues generated on sale of goods/order fees

Operations/Distribution Fleet of 220 refrigerated delivery trucks Current operations - metropolitan San Francisco Population density required to achieve efficiencies Sophisticated warehouse operations Automated Scalable "Inventory moves to the person" 12 Transfer stations

Strategy Overbuild fulfillment network 26 new warehouses ($1 billion) National expansion 10 major markets by year end 2001 Increase order size Increase repeat customers Its not about "groceries” Film processing, video rental, dry cleaning

Performance

Competition Existing online competitors - Peapod - Streamline - HomeRuns.com - NetGrocer - HomeGrocer.com

Competition - Peapod Based in Skokie, Illinois Started with store-based model Changing toward a central distribution warehouse Price scaled to order size – no free deliveries Operating in 8 markets and continuing with national expansion Declining sales and margins!!

Competition - HomeGrocer Based in Kirkland, Washington Operating in Seattle, Portland, southern CA Warehouse model Pricing similar to traditional grocers Competing on quality Major stakeholders Amazon.com, Kleiner Perkins Chair/CEO Mary Alice Taylor Formerly of Citigroup and Federal Express

Competition – “Buzz Factor” Financial Publication Citations Webvan 221 HomeGrocer 100 Peapod 89

Challenges Adaptation of consumers to on-line grocery shopping Competitive threats - Homegrocer.com(Amazon), traditional Operational efficiency/Accuracy/Technology Increased order size/Operating volume Managing expansion Operational constraints of perishable items

Challenges Adaptation of consumers to on-line grocery shopping Competitive threats - Homegrocer.com(Amazon), traditional Operational efficiency/Accuracy/Technology Increased order size/Operating volume Managing expansion Operational constraints of perishable items Demand disaggregation Incremental costs (retailer) vs. sunk costs (consumer)

Opportunities Ubiquitous computing Growth of Internet Personal Digital Devices Growth of Internet 177 million users 1999

Q&A Thank you!