May 1, 2001 2:00 PM PDT

Webvan hikes delivery fees

Webvan has raised delivery fees in some areas, the latest move by the besieged Net grocer to reach profitability.

Starting Tuesday, the delivery fee for an order under $75 will rise from $4.95 to $9.95 and a new $4.95 fee will be imposed on orders between $75 and $100. Orders over $100 will be delivered free, spokesman Bud Grebey said.

The fees only affect customers in Chicago and the San Francisco Bay Area; the company already charged the higher fees to customers in all other markets.

This is the second time since November that Webvan has raised its delivery fee. Webvan is struggling to right itself after ambitious expansion plans helped it burn through almost $1.2 billion. Most of the online supermarkets have collapsed, although Chicago-based Peapod, a Webvan rival, survived by partnering with brick-and-mortar grocery chain Royal Ahold.

Last week, Webvan closed its operations in Atlanta and Sacramento--leaving the company in seven markets--and laid off almost 900 workers.

On Monday, new Chief Executive Robert Swan sent some customers e-mail that said Webvan "expects all of our remaining markets to be profitable by the end of the year."

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Swan said Thursday during the company's earnings report that one market, in the Los Angeles area, had broken even. The company itself isn't expected to reach profitability until mid-2002, he said.

Swan said the cuts Thursday will allow the company to operate through the end of the year, and it will need about $25 million to fund operations into the second quarter of 2002. By that time, the company expects to become profitable and self-sufficient, he said.

But Webvan is racing the clock. Even as the company tries to raise money, it is appealing a Nasdaq delisting notice.

At the same time, Webvan has in recent months launched a series of ads and coupon specials aimed at wooing customers. Webvan launched a rewards program on Tuesday that offers customers points every time they shop. Once they reach certain goals, Webvan offers special delivery benefits, such as delivery times available only to the customer or the ability to reserve the delivery time every week.

 

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