Since the emergence of supermarkets in the first half of the 20th century
management
Description
Since the emergence of supermarkets in the first half of the 20th century, the challenge of
how to offer value-added services and enhance customer loyalty has been a defining industry
challenge. During the 1990s, the Internet offered what finally seemed to be a potential
opportunity by allowing customers to place orders online and then receive their goods through
home delivery. Peapod, founded by Andrew and Thomas Parkinson in Evanston, Illinois, was an
early entrepreneurial venture aimed at commercializing this “idea” – online grocery shopping –
by working with local grocery stores to add an online sales channel. The Parkinson brothers’
approach was not the only option. Webvan, a well-funded Silicon Valley start-up founded by
Louis Borders (a co-founder of Borders Bookstore) and led by George Shaheen (lured away from
a position as CEO of Accenture), considered an alternative business model in which online
grocery shopping would disrupt established brick-and-mortar supermarkets. Webvan built a
network of remote warehouses and employed sophisticated ordering and fulfilment technologies
to provide a vertically integrated substitute for traditional grocers, and promised just prior to its
IPO that “Webvan [is] all about leveraging technology and reinventing the grocery business, just
as Andersen had reinvented consulting ... [and will] set the rules for the largest consumer sector
in the economy.” (Forbes, 2000).
While both Peapod and Webvan were pursuing essentially the same “idea” (at exactly the
same time), the ways in which they went about commercializing that idea could not have been
more different. Whereas Peapod’s strategy depended on establishing itself as a value-added
complement to traditional grocers, Webvan’ success was premised on competition with these
brick-and-mortar supermarkets. While those with the (bitter) memory to remember the worst
excesses of the dot-cot boom will recollect the rapid rise and subsequent bankruptcy of Webvan
(and may wonder how Peapod has been able to prosper through 2012), the contrast between
Webvan and Peapod raises a fundamental issues facing start-up teams: what strategy should I
choose to commercialize and establish advantage from my idea?
