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Webvan’s two deals may be too late
Webvan cut a deal to sell PetsMart pet supplies and offer online coupons, but analyst fear these moves will not be enough to invigorate the struggling online grocer.
Earlier this year, last-miler Webvan cut two deals designed to strengthen the Foster City, Calif.-based online grocer’s position. But given the state of pure-plays, some wonder if it will be enough to keep the van rolling.
In late January, Webvan partnered with PetsMart to offer pet supplies and with information solution provider InformLink to bring manufacturers’ coupons to the web site. Webvan shoppers can click-through to PetsMart.com and order pet supplies, which Webvan warehouses and ships.
This is a good partnership, says Barrett Ladd, retail analyst with Gomez Advisors Inc. Partnerships with a strong nationwide brick-and-mortar store enhances pure-plays. “This is a lot like the ToysRUs and Amazon deal,” she says. PetsMart is a well-respected name that will lend credibility to Webvan.
InformLink is providing the technology for manufacturers to offer coupons on Webvan. Depending on where the shopper is navigating or what she has in her cart, the system will show her various coupons. Clicking on the coupon puts the item in the cart and automatically applies the discount-there are no coupon codes to enter at checkout. Webvan won’t disclose the terms or lengths of either deal.
But Ladd likens the moves to a Band-Aid. Although Webvan reported sales jumping from $34.9 million in 1999 to $259 million in 2000, its losses grew from $132 million to $413 million. And on Jan. 12, NASDAQ notified Webvan it could be delisted because its stock price has fallen below $1. Webvan will only say that it is working to trim costs and restore investors’ confidence. As part of its cost-cutting efforts, the company postponed opening in Baltimore, Washington, D.C., and New Jersey. However, Webvan tells investors it will still need up to $60 million in additional capital to fund its operation in 2002.
“That’s a challenge,” Ladd says. “I don’t know if any pure-plays are getting that kind of money.” The addition of PetsMart and manufacturer’s coupons will likely increase new and repeat customers and order size. “But the benefit is minuscule in terms of the overall business. How they manage expenses and restore investor confidence over the next six months will be paramount.”