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BUSINESSWEEK ONLINE: Business Week ebiz | |||||||||||||||||
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Terry Drayton's Net Heavies Could Help HomeGrocer Deliver His Seattle-area cyber grocery has won cash and counsel from Bezos and Barksdale. Now Drayton can go nationwide -- a region at a time Life is good for Terry Drayton, CEO of upstart Web grocer HomeGrocer.com. His Bellevue (Wash.) business, which now serves more than 10,000 customers in the Seattle area, expanded to Portland, Ore., on May 14. That came just days after the company received a hefty $42.5 million investment from Amazon.com and $5 million from former Netscape Communications CEO James Barksdale. With this money, the company can go ahead with its plans to expand nationwide. Drayton, 39, has his wife Beth to thank for getting all of this started. Back in 1994, when Drayton was running Aquaterra, a Vancouver (Canada) bottled water company, he arrived home one day and bragged to her about the company's home-delivery service. Beth, who was stuck at home with two small children, commented that she would be more impressed if he could figure out a way of delivering groceries to people's homes. That got Drayton thinking about developing grocery delivery as a new business venture. But it wasn't until 1996 that he decided to launch a delivery service that would harness the power of the Web. He started it in Seattle a year ago -- attracted by the strong retailing market and skilled software programmers. He got backing from Tom Alberg, a partner in venture-capital firm Madrona Investments. Alberg was an early investor in Amazon and believed groceries could have the same potential as books over the Net. He also was impressed with Drayton. "He was not experienced on the Internet, but he had the enthusiasm and the drive to make a successful company," Alberg says.
Drayton believes potential customers need incentives to start shopping online, so HomeGrocer offers them free delivery and a complementary bag of fresh produce on the first order. "We will do anything for the customer so they don't have to make an extra trip to the store," he says. BEZOS CARRIED THE BAGS. This kind of attention to customer service already is paying off. One of HomeGrocer's early customers was Jeff Bezos, CEO of Amazon.com, who liked it so much he decided to invest. HomeGrocer once doubled the amount of plums he ordered because the fruit was small, and brought him a special order of dog food -- a brand it didn't normally carry. Bezos got such a kick out of the HomeGrocer.com service that he agreed to commemorate his company's investment by helping Drayton deliver groceries to a customer. Drayton drove the truck and Bezos carried the bags. They both wore the HomeGrocer uniform of green pants, khaki shirt, and a baseball cap with the company's peach logo on the front. But you don't have to be Bezos to get attention from HomeGrocer.com. The company urges customers to request items that aren't on its inventory -- so it can expand its offering wisely. And drivers frequently hand out coupons for special offers when they make deliveries. FLOWER-BED FREEBIES. Drayton honed his customer-service skills while he was a boy mowing lawns for his neighbors in Calgary, Alberta. He always edged the flower beds as a freebie. "It made them look a lot better...and got me more customers," recalls Drayton. He polished his customer-service skills as a waiter during college and later got an MBA from York University. Then he bloomed as an entrepreneur, starting two water companies, a video production company, and an entertainment management company in a span of 15 years. Now he's in a business that requires every ounce of his business skills and experience. The grocery business has revenues of $415 billion in the U.S., but margins are razor-thin. On average, supermarket net operating margins are 1% to 2%. The supermarket chains are driven by scale and are very efficient, so analyst Ken Cassar of Jupiter Communications says it will be hard for a business like HomeGrocer.com to subsidize the cost of delivery with those margins. The two national online players -- Chicago-based Peapod and New York's Netgrocer -- have yet to make a profit.
The Amazon.com connection should help, too. Drayton sees HomeGrocer linking up with Amazon.com and its strategic partners -- drugstore.com and pets.com -- to deliver some of their products and perhaps collect a fee. "Why not? We already deliver books and pet food. We could bring the customers anything they need the next day," says Drayton. With such heavy hitters as Bezos and Barksdale on HomeGrocer's team, Drayton has a wealth of knowledge at his disposal. But that doesn't mean he has stopped listening to his customers -- and going the extra mile to make them happy. When the company does an initial public offering, possibly as early as this year, Drayton wants to offer his customers a crack at the shares. "I know I'm going to have to fight the underwriters, but it's the customers who have made this company successful. They deserve it," he says. Now that's customer service. Browder reports on technology and the Internet from Seattle _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ |
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RELATED LINKS Click here to visit the sites mentioned in the story: HomeGrocer.com Peapod drugstore.com pets.com Netgrocer Click here to read related e.biz stories: "Has This Online Grocer Found the Right Recipe?" "Cruising the Aisles of the New Cyber Pharmacies" | ||||||||||||
