Webvan Buys HomeGrocer.com
The online supermarket industry has started its consolidation, with the California-based Webvan buying Washington-based HomeGrocer.com for about $1 billion in stock. (See "Groceries in the Mist" in TidBITS 470 for a look at HomeGrocer.com.) The combined company will serve thirteen major metropolitan areas by the end of the year (Atlanta, Baltimore, Bergen County (NJ), Chicago, Dallas, Los Angeles, Orange County (CA), Portland (OR), Sacramento, San Diego, San Francisco, Seattle, and Washington, D.C.) and be in a good position to dominate the Internet grocery business, ahead of companies like Peapod and Streamline.com and the efforts of traditional supermarket chains, such as Albertsons in the Seattle area. However, even though the companies expect their merger to save $200 million in capital investments, delivering groceries still requires massive infrastructure costs in a business that traditionally suffers from razor thin margins. With Jupiter Communications estimating $7.5 billion in online grocery sales by 2003, there’s no question that online grocery shopping will succeed, but the players may change significantly by the time the dust settles. But the main problem with this merger? Webvan isn’t nearly as good a name as HomeGrocer – what is a webvan, anyway?