Webvan was an online grocery business that was started in 1999 by Louis Borders, founding partner of Borders Books, and went bankrupt in 2001. Webvan is a business-to-consumer based e-commerce company. At the time, Webvan offered customers to order groceries and fresh food, such as meat, produce and milk, over the Internet and deliver to them within the same day.
Webvan was one of the biggest e-commerce business at that time. Whereares, why did this large e-commerce business go bankrupt. Now, let us look into the major causes that brought it to bankruptcy:
1) An inappropriate business model
Webvan has incorrectly believed that it was in the technology business, instead of the grocery business. Instead of increasing of its merchandises, it just continuously improve its online business technology. This action made it fail to recognize it was selling the grocery, not the technology.
2) The lack of retail food experience from the management team
Webvan was managed by consultants who were appointed as officers and directors, even though they had no retail food experience. Since grocery business run on very low margins, even the most effectively managed can lose money. Webvan founder Louis Borders was an expert in selling books, however, books do not expire.
3) The lack of understanding of the sociology and psychology of retailing food
Webvan did not put much efford in understanding and studying the sociology and psychology of its customers. Because at that time, most of the customers still could not accept to buy the food and commodities without seeing and touching them.
4) Erroneous target marketing
The most obvious customers for Webvan’s services were not soccer moms or the upscale suburban families the company targeted but people who have problems getting to a grocery store. Obvious potential customers were senior citizens, mothers with very young children or disabled people. However, most of their target customers did not even know to online at that time.
5) The high cost of running an online grocery business
The cost for building Webvan’s high-tech Atlanta warehouse alone was a staggering $40 million—much more than warehouses for traditional retail grocery chains. Webvan used the latest technology to automate its warehouses, bought hundreds of refrigerated delivery trucks, and hired and insured drivers allover the country. Unfortunately, the profit that it earned could not cover the cost that it contributed. one of the Webvan's packaging and distributing centers is shown below:
So, these are 5 main causes that bring Webvan to its failure. It is very useful for us to set up our own e-commerce business by understanding its failure. Because it can help us to avoid the mistakes that might be arised.
After Webvan went bankrupt, it was purchased by Amazon and overcome all the mistakes that were occured before. For your information, you can kindly visit its website: http://www.webvan.com/
2 comments:
from your information is quiet useful. It let me more understand about online grocery. thanks for ur information, it‘s useful to me^^
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