homegrocer.com case study
TRANSCRIPT
Executive Summary • Internet Grocery Store • Environment • Industry • Firm resources & capabilities • Strategy & execution • Recommendations
Environment • e-Commerce • The “Dot Com
Bubble” • Venture Capital
(VC) • Initial Public
Offerings
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
Jan 98 Jan 99 Dec 99 Dec 00
Nasdaq® Stock Market Index 1998-2000
U.S. Grocery Industry • Mature Industry • Mass market • Buyer knowledge • Low profit margins • Slow growth • Unpleasant task for
consumers Grocery
27%
1999 retail sales
Seattle Grocery Market • 10th largest in U.S. • Oligopoly of 4 large
chains • Supplier
concentration • Threat of new
entry
Safeway 28%
Quality Food 13%
Albertson's 12%
Fred Meyer
12%
All others 35%
Seattle Market Share
Firm Resources
1. Skilled Management
2. Customer Fulfillment Center
3. Delivery Fleet
4. Proprietary Technology
5. Venture Capital Financing
Shopping Experience • Interactive &
personalized Storefront
• Convenience • Fresh, quality
products • Competitive prices • Extensive product
offering
Order Fulfillment Integrated Systems • Storefront • Warehouse (CFC) • Inventory • Billing • Routing
Customer Fulfillment Center
Home Delivery Next-day delivery
• 7 days/week • 90-minute window • Straight to kitchen • “Peach” logo trucks • Uniformed drivers • No tipping
Operational Efficiency • Customer Fulfillment Centers • Technology and Delivery Systems • Maximize delivery density • Inbound Logistics • Operations • Outbound Logistics
3,286
8,736
19,538
36,500
1998 Q3 1998 Q4 1999 Q1 1999 Q2
Seattle Daily Revenue
July 1998: Open for Business
• Create Awareness • Promote Loyalty • Attain Density
Seattle Daily Results
Revenue 93,650
COGS 67,709
Variable 17,606
Fixed 8,335
Business Plan at 14 Months
Revenue 36,500 COGS
29,930
Variable 10,115
Fixed 38,004
Actual Results at 12 Months
Flood of Venture Capital
0.3 8.8
158.9
245.5
0
50
100
150
200
250
1997 1998 1999 2000
$ m
illio
ns
Investment funds raised
VC Control
28%
14%
14% 5%
6%
6%
27%
Shares owned Amazon.com
Kleiner Perkins
Hummer Winblad
Jim Barksdale
Terry Drayton
Mary Alice Taylor
All others
• Opened in San Francisco Bay Area • Founded by Louis Borders of Borders
Books • Raised even more money than
HomeGrocer • Announced national expansion including
Seattle
Webvan Threat
5.7 10.8 21.2
29.8 42.4
56.0 64.7
88.2
1999 Q3 1999 Q4 2000 Q1 2000 Q2
Revenue Costs
National Expansion • National expansion • Filed for IPO • New management team
39.8
245.5
158.6
January 1 2000 IPO Proceeds June 30 2000
Checkout • Dot Com Bubble
burst • Cash hemorrhage • “Merger” with
Webvan
Recommendations • Strategic
– Defer national expansion
– Focus on Seattle
• Tactical – Introduce daily
specials – Lower delivery
threshold – Unattended delivery
27.71 12.80
Current Break-even
Expense/Order
365 2,500
Current Break-even
Orders/Day
Questions?
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