1. Case Study – WebVan and Peapod
Group - 2

2. Agenda Business Models of WebVan & Peapod Peapod’s Success
WebVan’s Failure
Relevant Business Model – Current Scenario

3. Business Models of WebVan & Peapod
Parameters
WebVan
Peapod
Strategy
Massive expansion into new markets
Another medium to purchase groceries
Expand as per market requirement
Organisational Structure
Vertical Integration
Horizontal Integration
Tie-ups with Ahold and Stop & Shop stores
Operations
Used technologies for providing automated process
Relied on human labour
Delivery Model
Hub & Spoke Model
Hybrid model
Infrastructure
High Tech distribution centres
26 warehouses
Existing infrastructures
Delivery-Time
First come first serve basis (Half hour delivery windows)
Delivery as per customer convenience (Either pick up from Stop & Shop or deliver the next day)
Product Portfolio
Perishable and Non Perishable food products
Over the counter drugs
General Merchandise
Groceries
Pricing & Order Size
$15 per order
Any order size
Varies with order amount
Minimum $50

4. Peapod’s Success
Use of existing facilities to lower infrastructure cost.
Realistic model of 10,000 customers.
Use of minimum order size of $50 and variable delivery fee
Alliance with local supermarket chain in developing grocery business (Quick Pick Centres)
Use of human labour

5. WebVan’s Failure
High Investment in high tech Distribution Centre, each cost $25-35 million and model of 26 cities
Utilization of Resources was about 20-30% - Demand was uncertain
Violates Fundamental Strategic principles (eg: need to align Supply Chain operation with Marketing).
High Break even point of 4000 orders per day
Wrong Distribution policy - Lead to loss of $130 per order
Failure in delivering groceries at the same price as in brick & mortar stores
Merger with HomeGrown

6. Relevant Business Model – Current Scenario
Some websites still use existing facilities and some have come up with their own infrastructure.
Today e-commerce websites are following mix of both models:
Have a tie-up with a store, customer can come and buy the product at a low price showing coupon, or he/she can buy the same from a new website. (Eg. Flipkart and Snapdeal)
A customer can choose from a portfolio of products from the website and can do online payment or cash on delivery. Companies can opt for drop ship strategy for warehousing, thus saving on infrastructural costs. (Saltnsoap.com)