Webvan Stakes Its Claim in Net Groceries Business - TheStreet

When I wrote

here in March about the coming importance of Web grocers, things looked pretty fuzzy. Early players

NetGrocer

and

Peapod

(PPOD)

were still wandering in the woods.

NetGrocer was still committed to

FedEx

ing your groceries, even from half a country away, which not only gets expensive fast but knocks out perishables. Peapod was looking for a new business model, having found that its plan to link up with local grocery chains -- through whose aisles Peapod order-pickers wandered, filling your custom basket -- got awfully expensive, capping potential profits. Other players --

Hannaford

and

Streamline

in the greater Boston area,

HomeGrocer

in Seattle -- were building customer loyalty, but

verrrrry

slowly.

The business was a mess, with no clear national leaders in sight.

How things have changed -- and haven't changed -- six months later. NetGrocer is still filling those FedEx boxes, a no-future approach if ever I saw one. Peapod has found a new business plan -- and has also discovered the high, profit-capping cost of building and maintaining its own warehouses. No big change there; both are still stumbling.

But two candidates for market leadership have now emerged, and this week you'll have a chance -- depending on your clout with your friendly broker -- to buy a piece of the action in one of the two likely big winners in this market.

And this market, trust me, is going to be

huge

.

Webvan: Join the discussion on

TSC

Message Boards.

This week,

Goldman Sachs

is bringing to market

Webvan

(WBVN:Nasdaq), not on the radar back in March, but today at the forefront of big thinking in Net groceries. The price range has been filed as $11 to $13; I think that, recalling early 1999 IPOs, that will nudge up a bit when Webvan is actually priced Thursday night. Goldman is set to sell 25 million shares, which even within the announced price range would raise more than $300 million, and produce a market cap for Webvan of more than $4 billion. And there's already enough demand to make this one a sellout.

Webvan is an audacious idea, and is set to burn through a hell of a lot of somebody's capital as it tries to stake its claim in the Net-groceries business. Founded in the Bay Area earlier this year by former book-chain mogul Louis Borders, Webvan is also moving into Atlanta -- and has big plans to expand across the nation.

Much has been made of Webvan's plans for huge, high-tech local warehouses in the markets it targets, and of the logistics experts it has hired to make those warehouses hum. Webvan promises customers competitive prices, select-quality produce, and -- here's the killer -- delivery within a half-hour window of the customer's choosing.

Since I don't live in a Webvan delivery area, I haven't tried the service. But friends in the Bay Area who have used Webvan since it started deliveries four months ago tell me they're delighted, with Webvan consistently meeting its promises. Where do I sign up, Louis?

If the company can expand rapidly without losing that "high tech, high touch" (thanks, John Naisbett) edge, it's going to be a big, big winner.

Beyond its business plan, which looks tricky but feels right, Webvan's biggest asset is George Shaheen, the buccaneer who drove

Andersen Consulting

to prominence, but finally succumbed, last month, to the seductive economics of dot-com-dom: a relatively trivial salary of $500,000 a year (hey, we're not talking about the minor leagues here), but ownership of as much as 5% of Webvan through options.

Shaheen's hiring was a masterstroke by Borders and his board: In this IPO, he's the comfort factor for Wall Street.

The other likely long-term winner in Net grocers -- this business is simply too large to be dominated by any single company -- looks to me like Seattle's HomeGrocer. With backing by VC meisters

Kleiner Perkins Caufield & Byers

and investors and board members like ex-

Netscape

CEO Jim Barksdale, HomeGrocer will be a strong competitor in every market it chooses to enter.

Unlike so many recent Web-related IPOs, Webvan feels like one likely to shoot up like a rocket on opening day -- no surprise there -- but to keep going, if after a few days of inevitable sags.

If, like me, you spent long hours hunched over that crummy/wonderful

Apple II

, cranking investment-analysis and portfolio numbers into

VisiCalc

, I have a treat for you -- a double treat, actually. And for you youngsters who've never even

heard

of VisiCalc, and maybe only barely of

1-2-3

, listen up, too: Uncle Jim is going to tell you how it was in the old days of gas-powered computers and flickering "green screens."

VisiCalc co-author Dan Bricklin has posted on his personal Web

page a wonderful history of his work with Bob Frankston and Dan Fylstra to create the original VisiCalc, in Apple BASIC. It's complete with images of early notebook jottings about how the program might work, and the bloody story of bringing it to market, why it wasn't patented --- then how VisiCalc got clobbered by

Lotus 1-2-3

.

Lotus, of course, eventually bought VisiCalc, and gave it a quiet but dignified burial in the potter's field of PC history.

(Bricklin's site was built with

Trellix

, Dan's latest invention (of many), which is a tool for building Web sites and Web pages without delving into HTML or XML. I was a big fan of Trellix, which is as practical as it is intellectually elegant, but especially with the rich Web-publishing features in Word 2000, and the rise of XML, I fear it, too, is history. But look around on the site, and see -- hmm, just like VisiCalc -- what might have been.)

Even better than his history and working notes, Dan got permission from Lotus to allow visitors to his Web site to

download and run on their Windows 95/Windows 98 PCs the original 1981 version of VisiCalc for

IBM

-compatible PCs.

You can get it, for free, there. Run it and taste the awesome power we once beheld on our very own desktops. Seriously, playing with this is a gas, and I can't imagine any longtime PC user not having fun with it.

You other chillun out there, stop giggling and show some respect for your elders!

Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are current or recent consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites your feedback at

jseymour@thestreet.com.