BUSINESSWEEK ONLINE:   Business Week ebiz
Q&A with Louis Borders September 16, 1999 "We're Building the Last Mile to the Consumer" To keep customers happy, online grocer/delivery service Webvan copied FedEx and -- yes, your dentist Prior to the launch of Louis H. Borders's latest venture, online grocer Webvan Group Inc., the 51-year-old entrepreneur sat down with Silicon Valley Bureau Chief Linda Himelstein to discuss Webvan's strategy as well as his bullish predictions for e-commerce. BW: What pieces of Webvan's model did you borrow from existing businesses? Borders: We copied a lot from FedEx and other package-delivery systems, which have hub and spoke systems. But we realized we could easily get overbooked, so we also used the dentist model. The dentist is always booked morning to night, and the customer is never dissatisfied. A dentist gives you a precise time. We used that to book reservations. If you can't get 6:30 to 7 then you get 7:30. We want to be on time. We studied Amazon.com as a benchmark for a good shopping experience, looked at Yahoo! as a benchmark for speech, relied on eBay as a benchmark for community, and CNN as an example of great content. Then we used the grocery industry's good standards for controlling food quality while in transit. BW: How does Webvan differ from traditional grocery stores? Borders: Grocery stores have to have inventory in 20 places, so their problem is 20 times more difficult than ours. We only have to have inventory in one place. And 20 grocery stores can't carry what one big store can. For example, bookstores can only carry between 5,000 to 8,000 titles, whereas superstores carry well over 100,000. So we can offer a very exciting selection of hard-to-get and not-so-hard-to-get items. Also, we've invented a highly automated distribution center that is built for picking single items of things. It's the first distribution center built for scalability. Associates can pick each piece of inventory and move that inventory from person-to-person. You can't have people walking around picking orders because you won't be able to get scale or broad selection. So the basic idea behind Webvan is that inventory moves to the person. BW: How does Webvan's delivery system work? Borders: We have transfer stations. We thought we needed 20 initially. Then decided that 12 was the right number. It was logistics vs. space vs. cost and driving time. Twelve gives you the best turnaround and fastest delivery and control of refrigeration. We ran trucks all over the place. We did mileage tests -- all at different times of the day. And we monitored temperature and simulated what was going on with the totes that hold the orders. BW: What difficulties have you experienced while trying to launch Webvan? Borders: Hundreds of issues have come up. Soft cheeses were getting crushed so we had to get more durable containers. We had cartons overflow because too many items were placed in the carts. We fixed that with software. Celery didn't fit into the product bags, so we had to get bigger bags. Small totes [holding orders] tipped over so we fixed that by putting weights in the tote while they went around the distribution center. BW: What obstacles does Webvan face? Borders: We're building the last mile to the consumer. I believe God is in the details. What am I worried about? Nine hundred details. So far, service from online grocers has not been adequate. Execution has not been adequate. This is a huge logistics challenge. So execution is the big risk. BW: What are your long-term goals for Webvan? Borders: We see this as a cornucopia of opportunity. Later, I think we can add pretty vital services, such as video rental, film processing, installation services for computers, a pharmacy, and dry cleaning. BW: How does the Internet affect retail in general? Borders: I think it's going to be tough times for bricks and mortar. The Net offers convenience, selection, quality, and price. That's compelling. Ultimately, to me, Niketown is the future of retail because it's entertainment. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS LVMH's Arnault: "I Don't Think E-Commerce Will Replace Traditional Shopping" Amazon's Bezos: Nurturing a New Species of Business Webvan's Louis Borders: "We're Building the Last Mile to the Consumer" AOL's Case: "At the Epicenter of the Revolution" Minority and Women Executives: Can E-Biz Become as Diverse as America? Morgan Stanley's Mary Meeker: "Playbooks for the Evolution of Internet Businesses" Priceline's Walker: "It's a Completely New Way of Buying"