Webvan Offers Same-Day Service in Seattle

Delivery e-tailer Webvan (Nasdaq: WBVN) started a same-day service for some of its Seattle, Washington customers Tuesday.

The company said it will test same-day delivery in the Seattle market and then evaluate expanding the service to the other markets it serves.

"A number of our customers requested this service and we determined a cost-effective way to bring this convenience to our customers, which also enhances our overall value proposition in the Seattle market," said Greg Kinney, vice president and general manager for Webvan-Pacific Northwest.

Kozmo made a name for itself by offering one-hour urban delivery of virtually any product. However, Kozmo abruptly shut down in April after three years in business.

By the Clock

At the outset, the only Webvan customers eligible to use the same-day delivery service are customers who have achieved platinum or gold status in the Webvan Rewards program.

Qualified consumers in the Seattle, SeaTac and Bellevue, Washington areas must order before noon to receive their deliveries between 5:00 p.m. and 9:30 p.m. Same-day delivery service is only available Monday through Thursday.

To qualify for same-day delivery and other perks, consumers earn one point for every US$1 that they spend at Webvan and get a 100-point bonus for orders over $100. Gold status is achieved after accumulating 1,500 points and platinum status is achieved after accumulating 2,750 points.

Webvan tested same-day delivery in Atlanta, Georgia earlier this year, just weeks before laying off all 485 employees in the Atlanta area and exiting the market completely.

Pulling Back

Overall, Webvan has been in the process of pulling back on its expansion plans. In July 1999, before Webvan went public and a month after its formal launch, the online grocer announced that it had signed a $1 billion contract with construction giant Bechtel to build fully automated grocery distribution centers in as many as 26 U.S. markets over a two-year period.

However, in January 2001, Webvan curtailed its planned expansion into several East Coast cities and started exiting markets. In addition to exiting Atlanta, the company has departed the Sacramento, California and Dallas, Texas markets.

Webvan has shed nearly 1,000 jobs this year and warned in its recent quarterly report that more cuts could be on the way. The company has said it has enough cash to last through the end of this year, but will need to raise as much as $25 million to survive until profitability.

Last month, Webvan sold off about $2 million worth of assets that it once hoped to use for an aggressive West Coast expansion. The company has also been seeking a tenant to lease its 350,000-square-foot warehouse in Kent, Washington, built at a cost of about $25 million last year.

Executive Exits

In April, Webvan lost its chief executive officer George Shaheen, who resigned after 18 months on the job. That announcement was later followed by controversy over Shaheen's golden parachute, which entitles him to $375,000 per year for the rest of his life.

Also, Louis Borders, Webvan's founder, announced in February that he was leaving the company for personal reasons.