E-Commerce: Webvan Completes Assimilation of Online Grocery Market
Just a few months after the Internet grocery war came to San Diego, the company that fired the opening salvo has changed hands.
HomeGrocer.com’s distinctive peach logo and tan trucks will soon disappear, along with the company name. Instead, HomeGrocer customers will see trucks with a blue-green letter W, a signal the company has merged with Foster City-based Webvan Group, Inc.
Seattle-based HomeGrocer.com announced it would bring its Internet grocery delivery service to San Diego last May.
Shortly after, WhyRunOut.com, of Aliso Viejo, announced it had inked a deal with Stater Bros. Markets to expand into the North County area, while the short-lived American Grocer, Inc., based out of National City, unsuccessfully attempted to start up its own grocery delivery company.
Amy Nobile, corporate affairs manager for Webvan, announced in a Jan. 6 statement to local customers that the HomeGrocer changeover would begin this month. The merger actually took place four months ago, when HomeGrocer stock was converted to Webvan stock Sept. 5, she said.
Both companies have been actively expanding. HomeGrocer entered five markets outside its native Seattle , Los Angeles, Orange County, San Diego, Portland, Ore., and Dallas/Ft. Worth , while Webvan reached out of the Bay area into Sacramento, Chicago and Atlanta, Nobile said.
Both delivery companies had been stretched thin financially, and although their markets did not overlap, both delivery companies were looking to expand into the same territory, she said.
“We were that far away from competing with each other in Atlanta,” Nobile said, holding her fingers a few inches apart to illustrate her point.
Eventually, the two companies realized they would do better by joining forces, and they agreed to merge, Nobile said.
“This merger will combine the power of two great companies. Together, HomeGrocer and Webvan will build a company that is stable, strong and capable of providing even better products and services,” she said.
Nobile noted during the third quarter ended Sept. 30, Webvan grossed revenues for the combined company of $87.4 million. That’s an increase of 47 percent over pro-forma combined revenues of $59.5 for the second quarter. Net loss for the combined company, however, was 26 cents a share, compared with a loss of 24 cents a share in the second quarter.
Nobile was not able to speak about Webvan’s fourth-quarter results, which are due out Jan. 25.
Nobile notes the company is now well-positioned for expansion. For five periods in a row, the company has grown in all key areas, picking up more than 185,000 new customers during the third quarter. Also, more than 75 percent of Webvan’s orders came from repeat customers, she said.
The completion of the merger has made Webvan the largest Internet retailer with personal delivery service. Soon, HomeGrocer customers will be able to order not only groceries, but other items now available at the Webvan site , including books, toys, CDs, clothes, housewares, videos, electronics and more, she said.
This is also the reason the new company is changing its name away from HomeGrocer. It’s part of a marketing concept to get both customers and vendors to think of the home delivery company as a service that provides more than just a supermarket, Nobile said.
Nobile stressed that this differs from the business model offered by WhyRunOut.com, which also offers delivery of groceries and other items. What WhyRunOut does is contract with existing stores to offer delivery. That means customers pay a premium for the delivery on top of the product cost in a typical brick-and-mortar store.
Webvan, however, maintains its stock in its own warehouses, with one warehouse and a fleet of trucks able to serve customers within a 45-mile radius, she said.
That greatly reduces the amount of real estate and the number of employees required, reducing the costs to the point where home delivery is priced about the same as going to the store to purchase an item, Nobile said.
The Webvan service recently received a high ranking from Consumer Reports Online, which gave its top overall scores to only three out of the 130 top Internet shopping sites.
Webvan joined babycenter.com and etoys.com as the top scorers, while most of the other on-line merchants had ratings of “Average” or “Very Good,” said Michelle Rutkowski, marketing director for Consumer Reports Online.
“(Webvan) excelled in the three key factors: good content, both the products themselves and the information about them; easy usability, including top-notch navigation; and policies that ensure consumers’ privacy and secure credit-card information,” she said.
Other important factors contributing to the high rating include a wide selection and an “especially good” delivery policy that includes free delivery with orders of more than $50 and an hourlong delivery window, Rutkowski said.
