|Fate||Merger acquisition by Webvan in 2000|
|Headquarters||Bellevue, Washington, then Kirkland, Washington|
|Key people||James Fierro (Founder), Terry Drayton (CEO), Jon Landers (SVP Marketing), Ken Deering (VP, Storefront), Bob Duffy (CTO)|
HomeGrocer.com, Inc. was one of the first online supermarket businesses, started in 1997 by Terry Drayton, Mike Donald, James Fierro and Ken Deering. HomeGrocer raised a total of $440M in investments from a who's who of investors including Kleiner Perkins Caufield & Byers, Amazon.com, John Malone of Liberty Media, Martha Stewart and Jim Barksdale.
HomeGrocer built and operated the first fully integrated Internet grocery operation. Unlike previous start-ups, HomeGrocer did not operate out of existing supermarkets, but instead built dedicated warehouse facilities where inventory was stored, orders picked and deliveries made using customized trucks. The first 50,000 sq ft (4,600 m2) facility opened in Bellevue, WA in early 1998 modeled on Costco warehouses and with low levels of automation. The product selection was a complete alternative to the traditional supermarket at comparable prices with an earned reputation for top quality fresh produce, seafood and meat. Deliveries were made in custom tri-temperature trucks with the distinctive HomeGrocer peach logo. Customer support was very strong and new facilities were opened in Portland, OR in May 1999, in Renton, WA in September 1999, in Irvine, CA in October 1999, in Fullerton, CA in January 2000, in Carson, CA in February 2000 in Asuza, CA in March, 2000, in San Diego, CA in April 2000 and in Dallas, TX in May, 2000. Each of these new facilities operated 7 days a week and were 100,000 sq ft (9,300 m2) with 50 delivery vehicles and a staff of 200. Daily sales reached over $1M per day by June 2000, at which time a total of 16 additional HomeGrocer facilities were under construction in markets including Atlanta, GA, Chicago, IL, Washington, DC. and Denver, CO. HomeGrocer developed all of its own technology including its award winning website, its wireless picking systems that used WiFi, and its driver "smart phones", all years before they were mainstream.
HomeGrocer completed a $288M IPO in March 2000 underwritten by Morgan Stanley and DLJ but needed more capital to meet the aggressive roll out that was already well underway. With the onset of the dot-com crisis, this capital became unavailable at any price, thereby leaving the company few alternatives to survive. In September 2000, stockholders approved a $1.2B all stock buyout by the cash-rich competitor Webvan of the much larger HomeGrocer.com. HomeGrocer was rebranded to Webvan, the management team fired and the technology and processes converted to Webvan. The Webvan technology did not work very well and their execution was poor. Most telling, the eight different HomeGrocer facilities converted to Webvan saw overnight sales declines of one-third, then over 50% within two weeks and never recovered. Formerly profitable HomeGrocer facilities quickly ended up with significant losses. Studies of what happened after the merger were not kind to the original Webvan management  who spent over $500M before going bankrupt less than a year later.
HomeGrocer sales peaked in November 2000 at over $1.5M per day making it the largest Internet grocery business ever created until UK based Ocado exceeded it in 2010. The HomeGrocer brand was purchased out of bankruptcy and eventually ended up being owned by Amazon. It exists today, but no longer sells perishables, such as fruits, vegetables, milk, and yogurt.
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- Anatomy of a failed merger: Webvan and HomeGrocer
- Terry Drayton says Webvan is gone but HomeGrocer may return
- Webvan bags HomeGrocer for $1.2 billion
- HomeGrocer-Webvan: A timeline