The Failure of Webvan & its cause

History of

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 Goldman Sachs and Yahoo, who encouraged it to rapidly build its own infrastructure (the 1st-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 at night.

Failure & its cause.

In the sober days of 2001,the Foster City, California, company said that it closed all operations and filed for Chapter 11 bankruptcy protection. In the announcement, which came just a year and a half after Webvan's remarkably successful IPO, the company said it has no plans to re-open.

why? Because:

1.Rapidly disappearing cash reserves.
In the first quarter of the year, Webvan had reported a net loss of $217 million and an accumulated deficit of $830 million. And things only seemed to be getting worse.

2.Company's aggressive expansion into multiple cities, combined with an overly complex website, for causing its demise.On another obvious note, Webvan was also too optimistic about people's willingness to ditch traditional grocery stores in favor of something new and different. This type of extreme optimism was pervasive in late 1999, when Webvan went public.

3.Quality of its delivery service. While there were, of course, customers who complained of late deliveries or squashed produce, the grocery service generally received very favorable reviews from customers.