Don't Cry for Argentina's Version of Webvan

Baldwin Louie — Mon, 30 Apr 2001 18:00:00 -0400

Online grocery deliveries may have suffered setbacks in the U.S., but they're going strong in Argentina's capital. These delivery boys don't work for some new Internet startup. They work for one of the country's largest supermarket chains, Disco, a 237-store unit of Dutch food conglomerate Royal Ahold. Disco has become the country's leading e-commerce player, and since launching online delivery in 1997, its online sales have grown to $40 million.

That's about half what Peapod, another unit of Royal Ahold, managed to sell in the much more affluent U.S. market. And Disco has pulled it off in a country where e-commerce is still in its infancy.

Accenture estimates that total e-commerce sales in Argentina are about $150 million, compared with $150 billion in the United States. (Research suggests that only about 5 percent of Argentines use the Net, as opposed to 60 percent of the U.S. population.)

Disco has built the business without the massive customized warehouses and automated distribution systems that cost Webvan hundreds of millions of dollars. Instead, it based the operation on a service that Disco has offered for decades: home delivery. Last year, about 25 percent of Disco's $2.5 billion in sales were delivered. "We have been intimately familiar with the workings and the economics of the home delivery business for a long time," says Pablo García Gili, CEO of Disco's online division Disco Virtual.

Another big difference: Disco execs were quick to recognize the discomfort Argentines have with punching their credit card numbers into a computer. Unlike Americans who use Webvan, Disco customers can pay for deliveries with cash or credit cards when the groceries arrive.

Disco Virtual does share one similarity with Webvan: It has yet to turn a profit. García Gili brushes the problem aside, saying Disco Virtual is still at an investment-heavy stage and has just finished a major redesign of its Web site. The new online store will replicate real-world shopping more closely, letting customers move through a virtual shopping aisle and click groceries off the shelves. Still, Disco's investment is well under $100 million, and that pales in the face of Webvan's $1.2 billion spending spree.

García Gili practically shudders at the comparison. "We have always moved cautiously," he says. "We would have never been caught in a Webvan-like crazy cash-burning mode."

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Don't Cry for Argentina's Version of Webvan