What We Can Learn

What we can learn from business planning documents — examples from Webvan Group.

Business plans and related documents can tell us a great deal about the assumptions and strategies of both successful and failed companies. Here are some examples of what we can learn. They are drawn from the initial public offering (IPO) filing of online grocer Webvan Group. IPO filings, have much in common with business plans and illustrates the kinds of information we find in those documents. Webvan went public in 1999 and declared bankruptcy in July, 2001.

Here are examples of the kinds of insights that researchers might obtain from company business plans. Because IPO filings have much in common with business plans, we excerpted the following examples from a pre-IPO filing with the Securities and Exchange Commission (SEC) by Webvan Group, Inc., in preparation for its initial public offering, which debuted on offering of stock. (S-1 Filing dated August 6, 1999) - Webvan S-1 Filing: August 6, 1999

What were founders' core assumptions about the business?

“Our interactive Webstore and highly automated distribution center were designed to provide high degrees of scalability and efficiency, enabling us to operate with much lower overhead and reduced headcount compared to traditional supermarkets… We believe that our innovative business design is the first solution to adequately address the "last mile" problem of e-commerce fulfillment by providing a highly efficient means of delivering goods directly and rapidly to consumers. We also believe that the significant capital investment in our business system provides us with a competitive advantage compared to traditional supermarkets and other online grocers.” - Webvan S-1 Filing: August 6, 1999

How did entrepreneurs plan to leverage the capabilities of the Internet?

“… The unique characteristics of the Internet create a number of advantages for online retailers and have dramatically affected the manner in which companies distribute goods and services. Specifically, online retailers use the Internet to:

  • provide consumers with a broad selection of products and services, increased information and enhanced convenience;
  • operate with reduced overhead costs and greater economies of scale;
  • frequently adjust featured selections, editorial content and pricing, providing significant merchandising flexibility;
  • "display" a larger number of products than traditional retailers at lower cost; and
  • obtain demographic and behavioral data about customers, increasing opportunities for direct marketing and personalized services.”

- Webvan S-1 Filing: August 6, 1999

What were the assumptions about market growth?

“... International Data Corporation estimates that consumer purchases of goods and services over the Internet in the U.S. will increase from $12.4 billion in 1998 to $75.0 billion in 2002. In addition, Forrester Research estimates that online grocery spending in the U.S. will grow from $235 million in 1998 to $10.8 billion by 2003 which will represent only 2% of the total market for grocery products in 2003.” - Webvan S-1 Filing: August 6, 1999

What were the assumptions about market size?

“The U.S. grocery market is large, with retail supermarket sales equal to approximately $449 billion in 1998, according to Progressive Grocer. In addition, the market for prepared meals or "home meal replacements" is growing rapidly and, according to ACNielsen, comprises an incremental $100 billion segment of the food industry. Many consumers find supermarket shopping to be a time-consuming and inconvenient experience. FMI has estimated that the average household made two trips to the supermarket per week and spent approximately $86 on groceries per week in 1998. “ - Webvan S-1 Filing: August 6, 1999

How did founders plan to gain competitive advantage over traditional businesses?

“Traditional store-based supermarkets face many challenges in providing a satisfying shopping experience for consumers. Physical space availability in stores limits the number of products supermarkets can offer and reduces merchandising flexibility. This forces traditional store-based supermarkets to limit their product selection to the most popular products, further impairing customer selection. Traditional grocery retailers also face significant costs associated with building and operating large brick and mortar stores, including costs associated with personnel, real estate, construction, store set-up, inventory and fixed assets. The challenges facing these traditional retailers have created an opportunity for online grocery retailers to provide a more compelling and cost-effective solution. The Internet provides a medium that could significantly improve the consumer grocery shopping experience. The Internet provides 24-hour shopping convenience and the ability to monitor order and information accuracy, and eliminates the need to wait in line. With an efficient business model, online retailers will also be able to reduce labor, real estate and other operating costs.” - Webvan S-1 Filing: August 6, 1999

How did founders plan to gain competitive advantage over online competitors?

“We believe that online grocers lack a scalable distribution system and a business model that optimizes cost efficiencies, which has made it difficult for them to deliver a high quality, low cost shopping solution in an efficient manner.“ - Webvan S-1 Filing: August 6, 1999

What were the core strategies?

“Our objective is to be the leading online retailer providing same-day delivery of consumer products. Our current product offerings are principally focused on food, non-prescription drug products and general merchandise. The key elements of our strategy are as follows: [Detailed text omitted]

  • Build brand awareness and market share…
  • Deliver superior customer service and operating performance….
  • Leverage efficient and scalable business design…
  • Replicate distribution center and delivery system in additional geographic markets…
  • Leverage distribution system to enter additional product categories…“

- Webvan S-1 Filing: August 6, 1999