WEBVAN: AGGRESSIVE STRATEGIES, OPTIMISTIC FORECAST

STEPHANIE LOUGHRAN

Webvan Group, Foster City, Calif., said it has aggressive strategies that will make the company profitable in 2002.

Despite the wave of "dot bomb" e-tailers that folded shop recently, George Shaheen, Webvan's chairman and chief executive officer, said, "Don't bet against us!" last week at the Credit Suisse First Boston Food & Drug Retailing Conference in New York.

Shaheen presented aggressive strategies to put the on-line grocer in the black next year, including its continued focus on customer retention, expanding co-branding opportunities with brick-and-mortar partner PETsMART, Pasadena, Calif., and on-line counterpart, PETsMART.com, Phoenix, and continuing its integration of HomeGrocer.

"We are able to provide our shoppers with a different shopping experience, but we have to remember we're dealing with one of the most complex propositions: changing people's shopping habits," said Shaheen.

He pinpointed the strategies needed in order to change customer's way of thinking, such as offering more sale items, adding on-line coupons, and creating a loyalty program. He noted that the loyalty program is already in the works.

Shaheen also said the on-line grocer will continue to focus on Webvan@work, a service that focuses on delivering foodstuffs, prepared meals and basic office supplies to small and medium-sized businesses.

"We find higher gross margins in these orders that allow us to use middle of the day delivery capacity, and it also allows us to develop a growing set of customers who shop with us very frequently," Shaheen said. "We have a department that has been set up to attack this market in all of our geographic areas, so we're expecting big things from Webvan@work in upcoming quarters."

Webvan has also begun offering private label items, adding approximately 800 Best Yet stockkeeping units, supplied by Fleming, Dallas. Shaheen said this addition would serve customers looking for commodity-like items, and elevate Webvan's gross margins anywhere from 10% to 25%.

Webvan has expanded its delivery window from 30 to 60 minutes, and increased minimum order size from $50 to $75, according to Shaheen.

He emphasized that the integration of HomeGrocer, which Webvan acquired in September 2000, continues to move forward. The merger has allowed for various positives in Webvan's working operations across its 10 markets, he noted.

"We would like to see the Webvan brand being leveraged with other retailers, both e-retailers and brick-and-mortar retailers," said Shaheen. "By bringing the two together, we can leverage and provide an offering for a larger group of customers that makes sense."

As the company's revenues approach $70 billion from 15 million households, Shaheen stressed that Webvan is in business for the long haul. "I think this space is for real," he said. "We got more right than wrong, and now we have to get more people to take advantage of it."