The Spectacular Failure Of Webvan

Webvan, a company with a large amount of potential, ended in failure for a variety of reasons.  The company had market data that showed the idea could work, had lots of capital and money from investors, and had lots of great software and technology that could have led to several cost efficiencies.  However Webvan had issues with growing too fast, trying to do too much, and trying to change a longstanding American tradition and habit of shopping at a grocery store.

The main issue facing Webvan was defining what the company was.  The CEO seemed to think that they were a one-stop shop for anything and everything.  They were not just groceries, and they were not just products.  They were an entire sales and shipping company for anything that could be found on the Internet.  They were in a way trying to become most of the entire supply chain.  Before they even mastered the grocery aspect they were already moving on to other products.  Pretty soon they were spread pretty thin and the buyers for all their products didn’t exist.  I don’t see why someone would want to buy groceries and Old Navy apparel at the same time.

In the end it seemed the problem was always getting customers, and repeat customers.  The idea for Webvan was for people who are busy, however the article mentioned that people didn’t consider time at the supermarket to be negatively valued.  The fact that people had to be home was also a problem.  I think it could have worked better if the delivery person had a key to the house, although that would be very unsafe.  Forever people have complained about waiting for the cable guy to show up, now they have to wait for the grocer.  Unlike cable however if the grocer doesn’t show up you won’t have food to eat, which is much more important.

A company like Webvan (the grocery aspect) would work for a limited amount of people, but Webvan was trying to make something that every single person could use.  They focused on too broad a market, and offered way too many products.  With barely any  margins per purchase, but a fuel and delivery cost that wasn’t passed on to the customer, I’m not sure how they could succeed.

From a personal standpoint, I enjoy shopping at the grocery store.  Buying a CD online is no problem because I know that all the CDs are the same.  However, in the grocery store, I like to look at what I’m getting, especially when it comes to produce and meat.  I feel that even if I got my food delivered I would still end up making trips to the grocery store for items I forgot, or items I needed that night for a spontaneous dinner.

I feel that if Webvan did something more along the lines of Netflix, which was focus on their distribution centers & customers, and partner with a delivery company like the post office or FedEx to take care of the delivery, they would have had a better shot at success.

Webvan was a company without a focused strategy, and showed why a business model on paper may turn out to be totally different from the business model enacted.