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.
It is now owned and operated by Amazon.com.
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
Benchmark Capital,
Sequoia Capital,
Softbank Capital,
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. 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 and at night.
HomeGrocer, a similar company, started operating the year before Webvan. It went public in March 2000 and, like Webvan, was losing large amounts of money. On 26 June 2000, Webvan bought out HomeGrocer.
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).
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.
Similar businesses
The online grocery market sector in North America 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 shut down in 2008, it was acquired and re-opened as CobornsDelivers within months).
Gopher Grocery is another
online grocer in the
Minneapolis-St. Paul area that has seen steady growth and success through its use of a
just-in-time (business) model. The Greater Toronto Area is serviced by Toronto's original home and office delivery company
Mr Case which was founded in 1984 and 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,
YourGrocer.Com 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.
Amazon has also recently unveiled "AmazonFresh", an online grocery delivery service serving Seattle, Washington. As of January, 2009, Webvan.com is operating as "part of the Amazon.com family" (i.e. shipping non-perishable items by UPS or other standard shippers, the way Amazon.com purchases are handled), offering "more than 45,000 non-perishable grocery items."
See also
e-commerce
Peapod
Stock market bubble
Dot-com bubble
Irrational exuberance
Ocado
References
External links
New Webvan
CNNMoney history of Webvan
News.com history of Webvan
Category:Online retail companies of the United States
Category:Dot-com
Category:Companies disestablished in 2001
Category:Defunct websites
Category:Online grocers