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 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

5. HED 460 © 1990-2002 Peapod, Inc. All rights reserved. Save my username & password Save my username & password New to Peapod? Groceries for your home Groceries for your business

6. HED 460

8. 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. 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. 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. 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. Preferred Service Models

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

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

27. HED 460 Order Status (capability)

28. HED 460 Returns/Back Orders

29. HED 460 Fulfillment Cost as % of Revenue

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