March 9, 2001 2:20 PM PST

Webvan not ready to throw in towel

Cash-strapped Webvan is going for broke, launching a TV ad campaign and a coupon program even as it faces delisting and insolvency.

As part of a new marketing strategy, Webvan will broadcast three different commercials in the nine cities it operates, including San Francisco, Los Angeles and Chicago. Webvan also has bought radio, Internet and direct mail ads.

In addition, the online supermarket is debuting coupons this week for the first time.

Webvan executives have acknowledged that the company is in a fight for survival. The company was due to run out of cash sometime this fall, but an aggressive revamping of its business plan has left it with enough cash to last until the end of the year.

By New Year's 2002, Foster City, Calif.-based Webvan will need between $40 million and $60 million in capital to fund next year's operations.

And since TV ads can quickly add up into tens of thousands of dollars, some analysts questioned why the company launched the campaign now. Webvan executives declined Friday to disclose the cost of the new campaigns.

"If they're trying to conserve cash, buying broadcast media isn't a good way to do it," said Laura Mitrovich, an analyst at the Yankee Group.

Webvan spokesman Bud Grebey said the new campaign is a sign that Webvan has no intention of giving up on growing its business.

"Hey, we're not going to do a rope-a-dope," he said. "We are going to be conservative in how we use our cash and cut back on a lot discretionary spending, but we will use our cash wisely to build our business."

The move hints Trading on thin icethat ailing Webvan may be growing desperate, Mitrovich said. The stock has plummeted to less than 95 percent of its value in the past year and is in danger of being dropped from the Nasdaq stock market.

"It's a last-ditch effort to get their name out there and get paying customers in the door," she said.

Webvan has tightened its belt in other areas. Last month, Webvan closed down its Dallas operations, laying off more than 200 workers. The company also postponed the launch of its services in northern New Jersey, Baltimore and Washington, D.C.

Grebey said the company intends to build its customer base, targeting households with young children. Webvan also wants to nudge existing customers into buying more on Webvan.

 

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