Andrew and Thomas Parkinson in Evanston

Description

Since the emergence of supermarkets in the first half of the 20th century, the challenge of how to offer value-added services and enhance customer loyalty has been a defining industry challenge. During the 1990s, the Internet offered what finally seemed to be a potential opportunity by allowing customers to place orders online and then receive their goods through home delivery. Peapod, founded by Andrew and Thomas Parkinson in Evanston, Illinois, was an early entrepreneurial venture aimed at commercializing this “idea” – online grocery shopping – by working with local grocery stores to add an online sales channel. The Parkinson brothers’ approach was not the only option. Webvan, a well-funded Silicon Valley start-up founded by Louis Borders (a co-founder of Borders Bookstore) and led by George Shaheen (lured away from a position as CEO of Accenture), considered an alternative business model in which online grocery shopping would disrupt established brick-and-mortar supermarkets. Webvan built a network of remote warehouses and employed sophisticated ordering and fulfilment technologies to provide a vertically integrated substitute for traditional grocers, and promised just prior to its IPO that “Webvan [is] all about leveraging technology and reinventing the grocery business, just as Andersen had reinvented consulting … [and will] set the rules for the largest consumer sector in the economy.” (Forbes, 2000). While both Peapod and Webvan were pursuing essentially the same “idea” (at exactly the same time), the ways in which they went about commercializing that idea could not have been more different. Whereas Peapod’s strategy depended on establishing itself as a value-added complement to traditional grocers, Webvan’ success was premised on competition with these brick-and-mortar supermarkets. While those with the (bitter) memory to remember the worst excesses of the dot-cot boom will recollect the rapid rise and subsequent bankruptcy of Webvan (and may wonder how Peapod has been able to prosper through 2012), the contrast between Webvan and Peapod raises a fundamental issues facing start-up teams: what strategy should I choose to commercialize and establish advantage from my idea?