WEBVAN TO EXPAND WITHOUT NEW DCS

JON SPRINGER

FOSTER CITY, Calif. -- Webvan Group here, which already sells groceries without building stores, is planning on going a step further and expand without building new warehouses.

Webvan's recent rollout in Sacramento, Calif. -- supplied by its Oakland facility some 80 miles away -- has encouraged the e-tailer to examine further "satellite" service areas, according to George Shaheen, president and CEO.

Speaking at the Goldman Sachs Global Retailing conference in New York recently, Shaheen said Webvan is considering expanding into Charlotte, N.C., from its existing warehouse in Atlanta; into Portland, Ore. from its Seattle distribution center, and into Milwaukee and Detroit from its Chicago facility. Its fulfillment center in Baltimore, set to open later this year, could also serve parts of southern Pennsylvania, Shaheen said.

Webvan fulfillment centers are designed to cover a 60-mile radius, but its hub-and-spoke distribution scheme allows Webvan to add additional "spokes" -- or stations where trucks transfer goods to local delivery vans -- that could serve nearby metropolitan areas, Shaheen said.

"Our expansion into Sacramento [launched May 30] was an experiment to see if we could expand beyond our primary area, if there was a market there to serve," Shaheen said. "We now think we can leverage our existing facilities with satellites in several areas. It's going to be a very powerful tool in our expansion."

Trucking grocery orders to a more distant transfer point does not require Webvan customers to make orders farther in advance, Webvan spokesman Bud Grebey told SN, although delivery "windows" -- or the time periods during which Webvan can arrive at customer homes -- are more limited in Sacramento than in the Bay Area.

Webvan, which earlier this month closed its merger with HomeGrocer.com, Kirkland, Wash., is still on track to serve 15 markets by mid-year 2001, Shaheen added, not including potential future satellite expansions. The HomeGrocer acquisition delivered new markets in Seattle; Portland, Ore.; Los Angeles; San Diego and Orange County, Calif., and Dallas. Webvan serves the San Francisco Bay area, Sacramento, Atlanta and Chicago. In December, Webvan plans to open new centers serving Bergen County, N.J., and the Baltimore-Washington area. Next June, sites serving Boston and New York City are set to open, Shaheen said.

HomeGrocer's facilities will be gradually switched to the Webvan brand name and platform, Grebey said, beginning early next year in Seattle, southern California and Dallas. In Seattle, the change to Webvan will be tied to the opening of a new Webvan distribution center in Kent, Wash., Grebey said. In Dallas and Los Angeles, Webvan will operate out of HomeGrocer's distribution facilities, he added.

Webvan has a lease for a new distribution center in Grapevine, Texas, near Dallas, but has no immediate plans to open until it builds a larger customer base from HomeGrocer's facility, Grebey said.

In his remarks to investors, Shaheen acknowledged the differences between the models of HomeGrocer and Webvan -- the former operates out of smaller, less-automated warehouses and offers fewer delivery options -- and said the merged companies will likely offer a combination of the best of both services going forward.

"We've seen some real benefits of the HomeGrocer model," Shaheen said, adding that a combination of manual and automated picking in warehouses -- 60% manual, 40% mechanized -- "seems like the optimal way to go in the future."

Shaheen also said Webvan would consider whether a 60-minute delivery window, rather than the 30-minute promise Webvan makes today -- is more appropriate. Webvan could also reassess whether it can raise delivery charges, which are currently free on orders of more than $50, compared to competitors who charge on orders up to $75, he added. "We have some levers we can pull."