In Webvan’s S-1 Filing in 1999, the company assumed that market growth for online grocery shopping would be tremendous, citing Forrester Research estimates that predicted online grocery spending in the U.S. would grow from $235 million in 1998 to $10.8 billion

by 2003. Unfortunately, more modest projections showing slow short-term growth rates proved far more accurate as consumers showed more resistance for using the Internet to purchase groceries than other types of goods during Webvan’s pursuit of the market (see Figure 1 and Table 1 ).

In sharp contrast to Webvan’s performance, Britain’s Tesco has thrived in the online grocery business due to major differences in its strategies and operations (see Table 2 for a comparison) . Instead of building its business from scratch, Tesco picks and packs its online orders from existing supermarkets. In this way, Tesco launched its online shopping for $56 million versus Webvan’s $1.2 billion startup costs. Tesco used a gradual roll-out plan instead of trying to attack the entire market. Tesco charged its customers $7.25 per order, generating millions of dollars in delivery fees and have the side benefit of encouraging larger orders. Unlike Webvan, Tesco realized that its online operation helps extend its brand as a grocer, but that it couldn’t survive on its

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