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| Fate | Bankrupt |
|---|---|
| Founded | late 1990s |
| Defunct | 2001 |
| Headquarters | Foster City, California |
| Industry | Online retailer |
Webvan was an online "credit and delivery" grocery business that went bankrupt in 2001. It was headquartered in Foster City, California, USA, near Silicon Valley. It delivered products to customers' homes within a 30-minute window of their choosing. At its peak, it offered service in ten U.S. markets: San Francisco Bay Area, Dallas, San Diego, Los Angeles, Chicago, Seattle, Portland, Atlanta, Sacramento, and Orange County. The company had originally hoped to expand to 26 cities.
In June 2008, CNET hailed Webvan as one of the greatest dotcom disasters in history.[1]
Contents |
History
Webvan was founded in the heyday of the dot-com boom in the late 1990s by Louis Borders, who also co-founded the Borders bookstore in 1971. Webvan's original investors included Goldman Sachs and Yahoo!, who encouraged it to rapidly build its own infrastructure (the first-mover advantage strategy popularized by Amazon.com) to deliver groceries in a number of cities.[2] Some journalists and analysts blamed this serious error of judgment on the fact that none of Webvan's senior executives (or major investors) had any management experience in the supermarket industry, including its CEO George Shaheen who had resigned as head of Andersen Consulting (now Accenture), a management consulting firm, to join the venture.
Webvan tried to embrace a total customer satisfaction model involving a 30 minute window delivery without considering that many working customers would like their groceries delivered at home at night.
Bankruptcy
While Webvan was popular, the money spent on infrastructure far exceeded sales growth, and the company eventually ran out of money. For example: Webvan placed a $1 billion (USD) order with engineering company Bechtel to build its warehouses, bought a fleet of delivery trucks, purchased 30 Sun Microsystems Enterprise 4500 servers, dozens of Compaq ProLiant computers and several Cisco Systems model 7513 and 7507 routers, as well as more than 80 21-inch ViewSonic color monitors and at least 115 Herman Miller Aeron chairs (at over $800 each).[3]
As part of its shutdown process, all non-perishable food was donated to local food banks. Webvan's legacy consists of thousands of colored plastic shipping bins for groceries that are still sitting in customers' basements and closets, and a yearly $375,000 severance package for ex-CEO Shaheen.[4]
Similar businesses
The online grocery market sector has seen many other failures, including Publix Direct. However, there have been a few successes. Two companies founded around the same time as Webvan that still exist today are Peapod started in 1989 in Chicago and SimonDelivers in the Minneapolis-St. Paul region of Minnesota and Wisconsin, although SimonDelivers announced on July 15, 2008, that it would suspend operations within two weeks. The GTA-area of Toronto is serviced by Grocery Gateway, which has partnered with and is now owned by local grocer Longo's. The New York City market is increasingly served by FreshDirect and ShopRite from Home. Some other companies, such as Peapod in the Northeastern United States, and Winder Farms in the Western United States existed before the Internet became popular, and adapted their business models to the new medium. Grocer HyVee of the midwest offers a delivery service, sometimes with online ordering, depending on the location / service area. Many cities in western Canada (including Calgary and Winnipeg) are served by the delivery company Pic n Del, which partners with local supermarkets such as Calgary CO-OP, Sobeys, and Canada Safeway[1].
Amazon has also recently unveiled "Amazon Fresh", an online grocery delivery service serving Seattle, Washington.
See also
References
- ^ "The greatest defunct Web sites and dotcom disasters". CNET (2008-06-05). Retrieved on 2008-06-05.
- ^ Finkelstein, Sydney; Harvey, Charles & Lawton, Thomas (2007). Breakout Strategy: Meeting the Challenge of Double-digit Growth. McGraw-Hill, p200. ISBN 0-07-145231-1.
- ^ Wolverton, Troy (2001-10-30). "Seeking relics amid Webvan's ruins", CNET News.com. Retrieved on 30 April 2007.
- ^ Sandoval, Greg (2001-05-15). "Ex-Webvan CEO to collect $375,000 yearly", CNET News.com. Retrieved on 30 April 2007.
