Webvan on the Road

Local laws can be very effective in protecting brick-and-mortar retailing from Internet competition. If you don’t believe me, take a look at Webvan.

Webvan must think it’s successful in San Francisco, because it has taken the show on the road. (My sister got a Webvan delivery while I was in San Jose recently, and we were quite pleased.)

Atlanta was chosen for its demographics. It’s young, wealthy, has lots of busy tech workers, and getting around our road system is a nightmare.

Unfortunately, Webvan failed to do its legal homework before its Atlanta launch, something I confirmed when I registered on the site.

Beer, wine and spirit sales are a big profit item in the San Francisco operation. Would you like a nice white wine with that fish, or how about freezing some vodka while you cook the potato pancakes? It’s all right there, click and go.

You can’t do that in Georgia. Here, Webvan can only offer non-alcoholic wine coolers and bar accessories. Maybe the store can eventually get a beer and wine license (although I’m sure the delivery people will have to check IDs each time to ensure divers are over 21), but even Atlanta brew-pubs are restricted as to the alcohol content of the beers they brew. And the voters here would probably burn down the place before they’d allow the delivery of anything stronger.

Prepared foods should be another big profit center for Webvan here. They’re not available yet, nor is there any indication on the site when they will be.

What they’re left selling are food and pharmacy items. Webvan can deliver condoms and caffeine tablets, along with hemorrhoid cream and cough syrup. Webvan also has a limited offering of gifts. (Get that graduate “The Art of Happiness” by the Dalai Lama.)

That leaves uncooked food. And if you have to rely on uncooked food for your profits you may call your prices retail, but they’re only retail in Beverly Hills. A pound of white mushrooms costs $2.76 (they’re $1.99 at my market). A pound of butter is $2.67 (I pay $2.19). A package of 12 taco shells is $2.78 (I pay $1.89).

I have some other problems with Webvan. The interface is kludgy, menus upon menus. Some neighborhoods are redlined I could register but they won’t deliver to me. (Although they will deliver across the street, which is a wealthier zip code.) But these are minor quirks, easily worked out. Most are temporary problems.

The lasting problems are the law and supply. Without a full range of prepared foods, Webvan can’t properly service its target market. (We have Eatzi’s and Harry’s Farmers Market, so I know good food can be brought home here.) Meanwhile, without the ability to sell high-margin spirits, Webvan’s retail prices will always look high to all, and be out of reach for most.

Maybe the folks at Webvan thought Atlanta was like New York: If they can make it here, they can make it anywhere. And if they do they will. But I also suspect they didn’t do their legal homework before committing to the market. Learn from their mistake.