Webvanwas adot-com companyandgrocerybusiness that filed forbankruptcyin 2001 after 3 years of operation. It was headquartered inFoster City, California,United States. It delivered products to customers' homes within a 30-minute window of their choosing.[2]At its peak, it offered service in ten US areas: theSan Francisco Bay Area;Dallas;Sacramento;San Diego;Los Angeles;Orange County, California;Chicago;Seattle;Portland, Oregon;andAtlanta, Georgia.[3]The company had hoped to expand to 26 cities by 2001.[4]
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Industry | Online retailer |
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Founded | 1996 |
Defunct | June 2001 |
Fate | Bankruptcy,resurrected byAmazon.comin 2009 |
Headquarters | Foster City, California,U.S. |
Products | Grocery |
Number of employees | 3,500 (at its peak)[1] |
![](https://upload.wikimedia.org/wikipedia/commons/thumb/4/49/Webvan.jpg/220px-Webvan.jpg)
Long after the failure of Webvan, the concept of companies delivering groceries very quickly grew from about 2020, and several companies were vying for business fromdark stores.[5]
History
editWebvan was founded in the heyday of thedot-com bubblein 1996 byLouis Borders,who also co-founded theBorders Groupin 1971.[6]
Growth
editThe company's investors pressured it to grow very fast to obtainfirst-mover advantage.[7]This rapid growth was cited as one of the reasons for the downfall of the company.[8]Webvan started taking orders in the San Francisco Bay Area in June 1999.[9]
Webvan placed a $1 billion order withBechtelto build its warehouses, and bought a fleet of delivery trucks.[10]In 2000, Webvan boughtHomeGrocer,a competitor that was also losing money, for $1.2 billion in stock.[11][12]At its peak in 2000, Webvan had $178.5 million in sales but it also had $525.4 million in expenses.[1]
Financing
editBenchmark Capital,Sequoia Capital,and Borders each invested $3.5 million in the company in aSeries A roundin 1997, buying shares for $9.58 each.[13]Sequoia later invested another $50 million,Softbank Capitallater invested $160.3 million, and Goldman Sachs' venture arm invested $50 million.[13]E-TradeandYahoo!each invested $10 million.[13]In total, venture capitalists invested more than $396 million in Webvan.
The company raised an additional $375 million in aninitial public offeringin November 1999, during thedot-com bubblethat valued the company at more than $4.8 billion.[14]Up to that time, the company had reported cumulative revenue of $395,000 and cumulative net losses of more than $50 million.[15]
Management
editNone of Webvan's senior executives or major investors had any management experience in the supermarket industry, including its CEOGeorge Shaheen,who had resigned as head of Andersen Consulting (nowAccenture), a management consulting firm, to join the venture.[14]Webvan had a contract to pay Shaheen, who gave up a $4 million per year salary at Andersen, $375,000 per year for life.[16]When the company filed bankruptcy in July 2001, Shaheen was anunsecured creditor.[17]Shaheen resigned in April 2001, while the company was on the verge of shutting down.[3]
Bankruptcy
editThe company lost over $800 million and shut down in June 2001, filing forbankruptcyand laying off 2,000 employees.[18][1]As part of its shutdown process, all non-perishable food was donated to local food banks.[19][20]
Reasons for failure
editCommentators point to several reasons for Webvan's failure:
- Aggressive expansion to many cities without proving its business model in its first market[21]
- A business model targeting price-sensitive mass-market consumers rather than upmarket consumers who would be more profitable[8]
- Building its own warehouses and fulfillment infrastructure from scratch,[8]in contrast to services such asPeapodwhich survived the dot-com bust and used the infrastructure of existing supermarkets (as did the laterInstacart)
CNETnamed Webvan one of the largest dot-com flops in history.[22]
Legacy
editA large number of Webvan's colored plastic shipping tubs are now used for household storage.[23]The company's distinctively shaped vans, now repainted, are still seen.
Some executives of the company went to work forAmazon.com.[24]
From about 2020 many companies were vying to provide ultrafast delivery, similar to the Webvan concept.
See also
editReferences
edit- ^abc"Webvan shuts down".CNN.July 9, 2001.
- ^"Online grocer expands".CNN.November 30, 1999.
- ^ab"Webvan quits Atlanta".CNN.April 26, 2001.
- ^Goldman, David (March 2, 2015)."10 big dot.com flops".CNN.
- ^Kale, Sirin (9 December 2021)."Beware the emergency avocado: what does ultrafast delivery really cost us?".The Guardian.
- ^D'Onfro, Jillian (April 18, 2014)."The Founder Of A Dot-Com Disaster Is Giving His Old Grocery Delivery Idea Another Shot".Business Insider.
- ^Finkelstein, Sydney; Harvey, Charles; Lawton, Thomas (2007).Breakout Strategy: Meeting the Challenge of Double-digit Growth.McGraw-Hill Education.p. 200.ISBN978-0-07-145231-1.
- ^abcRelan, Peter (September 27, 2013)."Where Webvan Failed And How Home Delivery 2.0 Could Succeed".TechCrunch.
- ^G. Weinzimmer, Laurence.The Wisdom of Failure: How to Learn the Tough Leadership Lessons Without Paying the Price.
- ^Wolverton, Troy (October 30, 2001)."Seeking relics amid Webvan's ruins".CNET.
- ^Beltran, Luisa (June 26, 2000)."Webvan goes shopping".CNN.
- ^FISHER, LAWRENCE M. (June 27, 2000)."Webvan Will Acquire HomeGrocer.com".The New York Times.
- ^abcEmert, Carol (July 15, 2001)."Venture lessons in Webvan collapse / Financing history a cautionary tale".San Francisco Chronicle.
- ^abRICHTEL, MATT (November 6, 1999)."Webvan Stock Price Closes 65% Above Initial Offering".The New York Times.
- ^"FORM 424(B)(1), Webvan Group, Inc".U.S. Securities and Exchange Commission.November 5, 1999.
- ^"Webvan pays off Shaheen".CNN.May 16, 2001.
- ^"Nevadans lose jobs at 'Net's Webvan".Las Vegas Sun.July 9, 2001."The company's list of unsecured creditors will include Webvan's former CEO George Shaheen, who resigned in April, triggering a clause in his contract that required the company to pay him $31,250 per month for the rest of his life. With the bankruptcy, Shaheen" will have to get in line with the rest of our creditors, "Grebey said."
- ^Delgado, Ray (July 9, 2001)."Webvan goes under / Online grocer shuts down -- $830 million lost, 2,000 workers fired".San Francisco Chronicle.
- ^"Webvan bags it for good".ZDNet.July 9, 2001.
- ^Sandoval, Greg (September 7, 2007)."Webvan delivers its last word: Bankruptcy".CNET.
- ^Cohan, Peter."Four Lessons Amazon Learned From Webvan's Flop".Forbes.
- ^Lanxon, Nate (November 18, 2009)."The greatest defunct Web sites and dotcom disasters".CNET.
- ^Aboujaoude, Elias (2012).Virtually You: The Dangerous Powers of the E-Personality.W. W. Norton & Company. p. 54.ISBN978-0393340549.
- ^Barr, Alistair (June 18, 2013)."From the ashes of Webvan, Amazon builds a grocery business".Reuters.