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

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

3. 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

4. Webvan Business Overview
IPO in November 1999
Market Capitalization - $4.89 billion
Price/Sales
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

5. Webvan Stock Performance

6. Webvan Stock Performance
Current analyst consensus - Strong/Moderate Buy

7. 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)

8. 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

9. Traditional Grocery Distribution Channel
Producer
Wholesaler
Retailer C C

10. On-Line Grocery Distribution Channel
Producer
Warehouse C C
Internet

11. Traditional vs. On-Line Operational Comparison

12. Webvan vs. Traditional Grocery Store

13. 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)

14. 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

15. 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

16. 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

17. Performance

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

19. 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!!

20. 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

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

22. 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

23. 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)

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

25. Q&A
Thank you!