WebVan: A Disaster on the Web
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"Webvan was all about leveraging technology and reinventing the grocery business, just as Andersen had reinvented consulting...[and will] set the rules for the largest consumer sector in the economy."
- George. T. Shaheen, CEO, Webvan.com1
"Online grocers 'must create storefronts as easy to use as Amazon's, build delivery infrastructure as sound as UPS' and pick and pack pickles and pineapples better than anyone ever has."
- Evie Black Dykema, senior analyst, Forrester Research.2
"The problem with the online supermarkets is that their business model is so cost intensive that profits are very hard to come by."
- Ken Cassar, analyst, Internet research firm Jupiter Communications.3
One More Dotcom Bust
Peapod was a major online grocer, launched in 1989 in Illinois. After it suffered huge losses for several years, it was taken over by a Dutch based brick-and-mortar supermarket chain Royal Ahold4 in March 2000. A much acclaimed store, Streamline, also suffered huge losses and had to be closed down in November 2000. Webvan was another online store that was launched with great expectations and ended in a disaster. It was set up in 1999 in the San Francisco Bay area to create an online grocery store, which would be highly automated, serve the entire country and offer a large variety of products. It decided to expand within the country by using expensive high-technology warehouses.
It also used refrigerated trucks and vans to ensure that the food items, which reached the customers, were fresh. However, despite its efficient services, Webvan soon found itself on the verge of bankruptcy.
The drawback of Webvan's e-tailing model was that its investments were much more than its profits, which made it difficult to break-even.
1] Scott Ard, Webvan IPO pushed back once again, news.com, November 3, 1999.