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

HED 460 Peapod Launched 1989 Profit 1 st 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 © Peapod, Inc. All rights reserved. Save my username & password Save my username & password New to Peapod? Groceries for your home Groceries for your business

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

Regionals PublixDirect – small dedicated warehouses Palm Beach/Broward Counties 28 zip codes plus 13 more by Atlanta and Orlando

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

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 ed 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 markets $19.95 delivery charge >sales and >order size reported

HED 460

Preferred Service Models

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 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 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

HED 460 Order Status (capability)

HED 460 Returns/Back Orders

HED 460 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