Forbes reports that Louis Borders has raised $30 million in investment capital that he plans to use to build an e-grocery business to compete with the likes of Amazon and Walmart. The new business, Home Delivery Service, came out of stealth mode this week.
According to the story, "The 71-year-old entrepreneur tried this once before. After founding the Borders bookstore chain with his brother, Tom, in 1971, he jumped into the dotcom frenzy of the mid-1990s with a novel concept: use the internet’s growing reach to create a digital grocery store that would allow consumers across the U.S. to store shopping lists online, order through their computers, and receive their food at their doorsteps. He called it Webvan and, like many supercharged startups at the time, it mushroomed into a national operation valued at $8 billion in just three years."
And then it collapsed, burning through hundreds of millions of dollars on its way to an ignominious demise that remains as a touchstone for many e-commerce businesses that resolutely try not to make Webvan-style mistakes.
Now, as the pandemic creates more demand for e-grocery, Borders thinks his time has come. Again.
Forbes writes that "Borders, as convinced as he was in 1996 that online grocery shopping is the future, says he can offer free delivery (no tipping allowed) and competitive prices because of the cost savings achieved through automation, as well as cutting out the grocery store middleman and collecting the retail markup himself."
The story goes on: "Sustaining interest after the pandemic fades has yet to be tested though, as does his business strategy, which looks a lot like the original version. Home Delivery Service will take on the expense of owning and operating warehouses, just like Webvan. It will rely on robots instead of workers to tick off the items on someone’s shopping list and move products directly from their warehouses to consumers, just like Webvan.
"He says his advantage this time around is a higher level of automation, which should allow him to fill online orders at half the expense as competitors. The plan includes a network of at least a hundred, 150,000-square-foot distribution centers (Amazon’s range from 400,000 to 1 million square feet) that will allow products to be received, stored, picked, packed, transported and delivered without ever being handled by a human worker. Robots will sort arriving inventory into trays and shuttle them into storage, where they will be retrieved by self-driving vehicles and delivered to a different group of robots with grips designed for specific types of products and hoisted into reusable grocery bags."
Forbes writes that "Borders has enticed at least two investors — Toyota Motors and Ingram Micro — who provided the early funding of $30 million, even though Borders has yet to open a single warehouse. He says the investors are interested in deploying the technology in their own factories … He’s now looking to raise $25 million through a Series A, which would help him build his first facility in San Francisco and start taking orders by 2021. He plans to have a nationwide network built in the next five or so years and is looking to add other types of merchandise, like apparel and toys."
- KC's View:
One has to wonder if, when preparing to take meetings with Borders, these investors are whistling to themselves, "Do It To Me One More Time." (That's a Captain & Tennille reference, just FYI.)
Let's be fair - Louis Borders was working on Webvan two years before Jeff Bezos launched Amazon. And there are parts of this model that seem to be in synch with the times, like a reliance on robotics and the use of lots of smaller warehouses that sound more like really, really big dark stores.
I have to admit that I wonder about launching in San Francisco - wouldn't it make more sense to test it in the heartland, where it is less expensive to operate and where a company like this will need to be successful if it is to be sustainable long-term?
And, it is a small thing, but isn't "Home Delivery Service" a little prosaic? I like my entrepreneurs and innovative initiatives to be able to find the balance between engineering and poetry.
There also seems to be a bit of hubris at work here. Borders is quoted in the story as saying, “Amazon is certainly best and first in the business, but their core model is to put stuff in a cardboard box and hand it to a third party. It’s just a different model.” If he thinks that's all Amazon is, then he is deluding himself and I wouldn't give him $100, much less tens of millions of dollars.
It may be that changing shopping habits created by the pandemic do offer Borders an opportunity, but when I think of Webvan I always think of a day in the summer of 2001 when I was in San Francisco and went to the then-new Pac Bell Park for the first time. I was sitting in the stands, enjoying the sunshine and the beer while watching the Giants play … and I placed my beer in one of the thousands of cup holders in the ballpark that had the Webvan logo on it. Webvan had gone out of business more than a month earlier, and this just struck me as symbolic of the company's history of bad investment decisions.