Webvan was an online grocery market which was founded by Louis Borders in the late 1990s. It sold groceries such as bread, vegetable and so on. It tried to embrace a total customer satisfaction by delivering products to customers' homes within a 30-minute window of their choosing regardless of day or night. At first, Webvan hoped to expand his business to 26 cities. However, it only offered service in ten U.S. markets at its peak including San Francisco Bay Area, Dallas, San Diego, Los Angeles, Chicago, Seattle, Portland, Atlanta, Sacramento, and Orange County. In 2001, Webvan went bankrupt. Why?
According to some of the journalist, the main reason that causes the failure of Webvan is lack of management experience of the executives or investor in the supermarket industry. Webvan’s investor included Goldman Sachs and Yahoo! and the CEO, George Shaheen had made the wrong judgement on implementing the strategy. They also fail to pay attention to the storefront aspects of business which is commonly left out by most of the online retailer. Quality customer service, inventory management, efficiency in shipping and delivery are also important in generating the profit. Webvan want to expand as fast as possible to various regions around the United States but it also suffered a lot of problems. One of the problems is logistical problem such as equipment breakdown in its warehouses and traffic jams that delayed deliveries. The unexpectedly high cost incurred had affected the profitability of the Webvan’s business. In addition, Webvan spent a lot of money in rapidly build the infrastructure when it is popular. According to the report of Webvan’s company, the average daily expense was $1.8 million which was nearly four times its average daily sales of $ 489,000. Webvan’s investments were much more than its profits which made it difficult to break-even and the company eventually ran out of money. Two years after it was launching, Webvan decided to fire it employees and file for bankcruptcy. In a nutshell, Webvan was being listed as the highest dot.com flop in the history of online grocery.
According to some of the journalist, the main reason that causes the failure of Webvan is lack of management experience of the executives or investor in the supermarket industry. Webvan’s investor included Goldman Sachs and Yahoo! and the CEO, George Shaheen had made the wrong judgement on implementing the strategy. They also fail to pay attention to the storefront aspects of business which is commonly left out by most of the online retailer. Quality customer service, inventory management, efficiency in shipping and delivery are also important in generating the profit. Webvan want to expand as fast as possible to various regions around the United States but it also suffered a lot of problems. One of the problems is logistical problem such as equipment breakdown in its warehouses and traffic jams that delayed deliveries. The unexpectedly high cost incurred had affected the profitability of the Webvan’s business. In addition, Webvan spent a lot of money in rapidly build the infrastructure when it is popular. According to the report of Webvan’s company, the average daily expense was $1.8 million which was nearly four times its average daily sales of $ 489,000. Webvan’s investments were much more than its profits which made it difficult to break-even and the company eventually ran out of money. Two years after it was launching, Webvan decided to fire it employees and file for bankcruptcy. In a nutshell, Webvan was being listed as the highest dot.com flop in the history of online grocery.
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