Story of Webvan
Webvan was an online “credit and delivery” grocery business. Webvan tried to have a total customer satisfaction model that involving a 30 minute window delivered products to customers' homes after their choosing.It was founded in the late 1990s by Louis Borde
rs who also co-founded the Borders bookstore in 1971. Webvan's original investors included Goldman Sachs and Yahoo!, who encouraged Webvan to rapidly build its own infrastructure to deliver groceries in a number of cities. It was headquartered in Foster City, California, USA which near Silicon Valley. It offered service in ten U.S. markets such as Los Angeles, Chicago and Portland. The company had originally hoped to expand to 26 cities. However, Webvan went bankrupt in 2001.
What causes Webvan failure?
Webvan was an online “credit and delivery” grocery business. Webvan tried to have a total customer satisfaction model that involving a 30 minute window delivered products to customers' homes after their choosing.It was founded in the late 1990s by Louis Borde
rs who also co-founded the Borders bookstore in 1971. Webvan's original investors included Goldman Sachs and Yahoo!, who encouraged Webvan to rapidly build its own infrastructure to deliver groceries in a number of cities. It was headquartered in Foster City, California, USA which near Silicon Valley. It offered service in ten U.S. markets such as Los Angeles, Chicago and Portland. The company had originally hoped to expand to 26 cities. However, Webvan went bankrupt in 2001.What causes Webvan failure?
While Webvan was popular, the management used the money spent on infrastructure that far exceeded sales growth. Furthermore the company even
tually 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 System model 7513 and 7507 routers, as well as more than 80 21-inch ViewSonic color monitors and at least 115 Herman Miller Aeron chairs which over $800 per each. Besides, some journalists and analysts blamed that none of Webvan's senior executives (or major investors) had any management experience in the supermarket industry such as CEO George Shaheen who had resigned. On the other han
d, the ineffective customer services such as failed to deliver the order on time. This will make customer has a negative impression to Webvan. Some of the comments from the customer will also lead people put less confident to buy products from Webvan. These are some of the factors made Webvan went bankrupt in 2001.In conclusion, e-commerce companies in order to avoid failure should have useful of business strategies which are 4P’s (product, price, promotion and place), organizational structure, customer relationship and sensitive to the external factors such as technological and competitive environment.
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