WEBVAN IS ROLLING OUT $1 BILLION DC PLAN

PATRICK SCIACCA

FOSTER CITY, Calif. -- Webvan, the Internet grocery retailer here, is implementing an aggressive $1 billion growth plan in an effort to capture the burgeoning Internet grocery retail market.

The retailer has enlisted a third-party construction, engineering, development and management company to bring the project to fruition and the substantial capital will be used to open 26 new distribution centers across the United States over the next 24 months, according to Chris Mannella, vice president of marketing for Webvan.

The first warehouse in this development series is scheduled to open in Atlanta by early 2000, Mannella told SN.

Other companies jockeying for position in the growing Internet grocery business include Homegrocer.com, Bellevue, Wash., which recently received a $4.2 million investment from Amazon.com and NetGrocer.com, North Brunswick, N.J.

Although at least two other Internet retailers, Peapod, Skokie, Ill., and Streamline, Westwood, Mass., have constructed dedicated warehouses to expand their Internet grocery retailing models beyond their immediate areas, many Internet retailers prefer to take a regional approach to their growth.

Despite some reports that the cash to fund this project may be acquired through junk bonds, Mannella said he would not comment on the "funding alternatives" for the project.

The new facilities, which will be developed by Bechtel, San Francisco, are based on a 330,000\-square\-foot warehouse and its automated system created by Webvan, www.webvan.com, to serve its Bay area clientele.

The retailer began its on\-line shopping and delivery service in the Bay area in June.

"We have a DC in Oakland that services the San Francisco area; Bechtel will take the design of that center that we have created internally and manage the construction of that design," Mannella told SN.

Mannella said that the rapid expansion plan is possible because of its "strategic alliance" with the third\-party construction company.

"We've got a plan to roll out to cities across the country [and] we teamed [up] to accelerate the rollout," he said.

One of the challenges of a rollout of this magnitude is the ability to scale the warehouse system to fit all of the planned DCs.

"The goal is to minimize changes [to the warehouse systems], but we have built them in a way that is highly modular," Mannella said, adding that the Atlanta facility would be comparable in size and scope to its Oakland counterpart.

The Internet retailer told SN that what makes Webvan different from other retailers is how it leverages its technology to better serve its customers.

"Our key strengths are developing the systems and technology that allow us to deliver a unique kind of customer offer," Mannella told SN.

He explained that when a shopper orders over the net, the order is sent to the warehouse facility. When the order comes into the facility it is assigned a plastic bin called a tote that holds the order. A bar code on the tote is read and directs the movement of the order through an automated conveyor system, all of which is predetermined by software developed by Webvan.

The tote stops at the appropriate stations required to fill the order, i.e., produce, meat, etc. After the order is filled, it is moved to a staging area for packing. The system allows the retailer to process orders for the same day.

Mannella told SN that a customer could pick a 30\-minute delivery window for the same day or up to five days in advance for a grocery order.

The retailer also provides prepared meals and the service is free for orders over $50; a fee of $4.95 is charged for orders under $50.