What Went Wrong with Webvan

WEBVAN

What was it about..??

A startup way ahead of its time. A startup that promised delivery of groceries within 30 minutes of ordering, from state-of-the-art order fulfillment centers manned by advanced robots

It raised $375 million in its November 1999 initial public offering, achieving a peak stock market value of $1.2 billion.

The company bragged about its 26-city expansion plan, signing a $1 billion Bechtel contract to build high-tech warehouses worth $30 million each. Then, it filed for bankruptcy in July 2001 after losing money every year.

So what went Wrong..?

·         Competition

Stop & Shop supermarkets acquired PeaPod — it operated a service that delivered groceries ordered online.

·         Wrong Profit Making Stratergy.

Webvan advertised that its prices were 5% lower than conventional stores. All of these resulted from its hope that the number of customer accounts would be high enough to make profits after three or four quarters. In reality, the number was far below the forecasts and the company kept losing money.

·         Too much money, too early.

The management team was too confident and ambitious. They wanted to do everything everywhere in a huge scale. Consequently, they went against their original strategy of providing a more cost-effective solution.  The invested a lot and soon went bankrupt.

From Getting the best consumer website in 2000 to getting bankrupt in next 2 years show that 

Sometimes too early in the market can also be Dagerous.