Webvan

Last updated
Webvan
Industry Online retailer
Founded1996;27 years ago (1996)
DefunctJune 2001 (2001-06)
Fate Bankruptcy, resurrected by Amazon.com in 2009
Headquarters Foster City, California, U.S.
Products Grocery
Number of employees
3,500 (at its peak) [1]
Webvan Webvan.jpg
Webvan

Webvan was a dot-com company and grocery business that filed for bankruptcy in 2001 after 3 years of operation. It was headquartered in Foster City, California, United States. It delivered products to customers' homes within a 30-minute window of their choosing. [2] At its peak, it offered service in ten US areas: the San Francisco Bay Area; Dallas; Sacramento; San Diego; Los Angeles; Orange County, California; Chicago; Seattle; Portland, Oregon; and Atlanta, Georgia. [3] The company had hoped to expand to 26 cities by 2001. [4]

Contents

Long after the failure of Webvan, the concept of companies delivering groceries very quickly grew from about 2020, and several companies were vying for business from dark stores. [5]

History

Webvan logo as seen on an orphaned shipping bin Webvan logo.png
Webvan logo as seen on an orphaned shipping bin

Webvan was founded in the heyday of the dot-com bubble in 1996 by Louis Borders, who also co-founded the Borders Group in 1971. [6]

Growth

The company's investors pressured it to grow very fast to obtain first-mover advantage. [7] This rapid growth was cited as one of the reasons for the downfall of the company. [8] Webvan started taking orders in the San Francisco Bay Area in June 1999. [9]

Webvan placed a $1 billion order with Bechtel to build its warehouses, and bought a fleet of delivery trucks. [10] In 2000, Webvan bought HomeGrocer, a competitor that was also losing money, for $1.2 billion in stock. [11] [12] At its peak in 2000, Webvan had $178.5 million in sales but it also had $525.4 million in expenses. [1]

Financing

Benchmark Capital, Sequoia Capital, and Borders each invested $3.5 million in the company in a Series A round in 1997, buying shares for $9.58 each. [13] Sequoia later invested another $50 million, Softbank Capital later invested $160.3 million, and Goldman Sachs' venture arm invested $50 million. [13] E-Trade and Yahoo! each invested $10 million. [13] In total, venture capitalists invested more than $396 million in Webvan.

The company raised an additional $375 million in an initial public offering in November 1999, during the dot-com bubble that valued the company at more than $4.8 billion. [14] Up to that time, the company had reported cumulative revenue of $395,000 and cumulative net losses of more than $50 million. [15]

Management

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. [14] Webvan had a contract to pay Shaheen, who gave up a $4 million per year salary at Andersen, $375,000 per year for life. [16] When the company filed bankruptcy in July 2001, Shaheen was an unsecured creditor. [17] Shaheen resigned in April 2001, while the company was on the verge of shutting down. [3]

Bankruptcy

The company lost over $800 million and shut down in June 2001, filing for bankruptcy and laying off 2,000 employees. [18] [1] As part of its shutdown process, all non-perishable food was donated to local food banks. [19] [20]

Reasons for failure

Commentators point to several reasons for Webvan's failure:

CNET named Webvan one of the largest dot-com flops in history. [22]

Legacy

Thousands of webvan tubs survive as household storage bins Webvan tubs.png
Thousands of webvan tubs survive as household storage bins

A large number of Webvan's colored plastic shipping tubs are now used for household storage. [23] The company's distinctively shaped vans, now repainted, are still seen.

Some executives of the company went to work for Amazon.com. [24]

From about 2020 many companies were vying to provide ultrafast delivery, similar to the Webvan concept.

See also

Related Research Articles

<span class="mw-page-title-main">Dot-com bubble</span> Tech stock speculative craze, c. 1997–2003

The dot-com bubble was a stock market bubble in the late 1990s. The period coincided with massive growth in Internet adoption, a proliferation of available venture capital, and the rapid growth of valuations in new dot-com startups.

<span class="mw-page-title-main">Kozmo.com</span>

Kozmo.com was a venture-capital-funded online company that promised free one-hour delivery of "videos, games, DVDs, music, mags, books, food, basics & more" and Starbucks coffee in several major cities in the United States. It was founded in March 1998 by young investment bankers Joseph Park and Yong Kang in New York City, and was out of business by April 2001. The company is often referred to as an example of the dot-com bubble. In January 2013, the brand was bought by Yummy.com and announced that they would relaunch soon. In March 2018, Kozmo was relaunched as a warehouse club. The Kozmo.com website is offline as of July 2023.

Pets.com was a dot-com enterprise headquartered in San Francisco, U.S, that sold pet supplies to retail customers. The website was launched in November 1998 and was shut down in November 2000. A high-profile marketing campaign gave it a widely recognized public presence, including an appearance in the 1999 Macy's Thanksgiving Day Parade and an advertisement in the 2000 Super Bowl. Its popular sock puppet advertising mascot was interviewed by People magazine and appeared on Good Morning America.

<span class="mw-page-title-main">Winn-Dixie</span> American supermarket chain

Winn-Dixie Stores, Inc., styled as Winn✓Dixie, is an American supermarket chain headquartered in Jacksonville, Florida. Winn-Dixie operates more than 546 stores in Louisiana, Mississippi, Alabama, Georgia, and Florida. The company has had its present name since 1955 and can trace its roots back to 1925.

<span class="mw-page-title-main">Boo.com</span>

Boo.com was a short-lived British eCommerce business, founded in 1998 by Swedes Ernst Malmsten, Kajsa Leander and Patrik Hedelin, who were regarded as sophisticated Internet entrepreneurs in Europe by the investors because they had created an online bookstore named Bokus.com, the third largest book e-retailer, before founding boo.com.

Chemdex Corporation, later known as Ventro Corporation and then NexPrise, Inc., was a B2B e-commerce company that first operated an online marketplace for products related to the life sciences industry such as laboratory chemicals, enzymes, and equipment, but later expanded into a few other industries. It was notable for its $7 billion market capitalization during the dot-com bubble despite minimal revenues.

<span class="mw-page-title-main">Halsey Minor</span> American businessman

Halsey McLean Minor Sr. is an American businessman who is known for founding CNET in 1993, the first comprehensive consumer-facing technology content publisher. He is also the founder or co-founder of the technology companies such as the virtual reality startup Live Planet, VideoCoin, and Vivid Labs.

Peapod Online Grocer (US), LLC is an American online grocery delivery service. By February 2022, it changed its name to Peapod Digital Labs.

<span class="mw-page-title-main">Divine, Inc.</span>

Divine, Inc., originally Divine Interventures, was a company that invested in internet companies during the dot-com bubble. The company was originally modeled after CMGI but changed its business plan after the bubble burst.

<span class="mw-page-title-main">Modo (wireless device)</span> Discontinued wireless consumer electronic device

Modo was a wireless device developed by Scout Electromedia, Utilizing pager networks, the device was designed to provide city-specific "lifestyle" content such as restaurant & bar reviews, movie listings, in addition to original curated content by Scout's developers.

<span class="mw-page-title-main">Grocery Outlet</span> American retail company

Grocery Outlet Holding Corp. is an American discount closeout retailer consisting exclusively of supermarket locations that offer deeply discounted, overstocked, and closeout products from name-brand and private-label suppliers. The company has stores in California, Oregon, Washington, Idaho, Nevada, Pennsylvania and New Jersey.

<span class="mw-page-title-main">BI-LO (United States)</span> American supermarket chain owned by Southeastern Grocers

BI-LO was an American supermarket chain owned by Southeastern Grocers, headquartered in Jacksonville, Florida. At the time of the banner’s elimination, supermarkets under the BI-LO brand were operated in Georgia, South Carolina, and North Carolina.

<span class="mw-page-title-main">Flooz.com</span>

Flooz.com was a dot-com venture, now defunct, based in New York City that went online in February 1999. It was promoted by comic actress Whoopi Goldberg in a series of television advertisements. Started by iVillage co-founder Robert Levitan, the company attempted to establish a currency unique to Internet merchants, somewhat similar in concept to airline frequent flyer programs or grocery store stamp books. The name "flooz" was based upon the Arabic word for money, فلوس, fuloos. Users accumulated flooz credits either as a promotional bonus given away by some internet businesses or purchased directly from flooz.com which then could be redeemed for merchandise at a variety of participating online stores. Adoption of flooz by both merchants and customers proved limited, and it never established itself as a widely recognized medium of exchange, which hindered both its usefulness and appeal.

Tesco.com is an electronic commerce website operated by Tesco. It offers a wide range of other products, including electronic goods, books, broadband and financial services. Tesco closed their Tesco Direct website in 2018.

George T. Shaheen is an American businessman. He became chief executive at management consulting firm Andersen Consulting in 1989, and in 1999 became CEO of Webvan. Shaheen was CEO of Siebel Systems from 2005 until 2006.

<span class="mw-page-title-main">HomeGrocer</span> Online supermarket business

HomeGrocer.com, Inc. was an online supermarket business.

govWorks Inc. was a dot-com company that was founded in 1998 by Kaleil Isaza Tuzman, Tom Herman and Chieh Cheung. It went bankrupt when the dot-com bubble burst in 2000. govWorks's rise and fall is documented in the 2001 documentary Startup.com. The firm, originally known as Public Data Systems, produced software to help government clients track contracts and purchasing functions. As the Internet boom accelerated, the company transitioned toward becoming an Internet web portal.

<span class="mw-page-title-main">Instacart</span> Internet-based grocery delivery service

Maplebear Inc., doing business as Instacart, is an American delivery company based in San Francisco that operates a grocery delivery and pick-up service in the United States and Canada accessible via a website and mobile app. It allows customers to order groceries from participating retailers with the shopping being done by a personal shopper. The company also provides alcohol delivery in states and provinces where it is allowed. It has partnerships with 1,400 retail banners comprising 80,000 stores. In 2022, it fulfilled 262.6 million orders with a total transaction value of $28.8 billion and an average transaction value of $110.

<span class="mw-page-title-main">Munchery</span> Online food ordering and meal delivery service

Munchery Inc. was an online food ordering and meal delivery service that served parts of San Francisco, Seattle, and New York City. The company shut down abruptly on January 21, 2019. It was valued at $300 million. The website currently relaunched as a recipes-only website.

References

  1. 1 2 3 "Webvan shuts down". CNN . July 9, 2001.
  2. ↑ "Online grocer expands". CNN . November 30, 1999.
  3. 1 2 "Webvan quits Atlanta". CNN . April 26, 2001.
  4. ↑ Goldman, David (March 2, 2015). "10 big dot.com flops". CNN .
  5. ↑ Kale, Sirin (9 December 2021). "Beware the emergency avocado: what does ultrafast delivery really cost us?". The Guardian.
  6. ↑ D'Onfro, Jillian (April 18, 2014). "The Founder Of A Dot-Com Disaster Is Giving His Old Grocery Delivery Idea Another Shot". Business Insider .
  7. ↑ Finkelstein, Sydney; Harvey, Charles; Lawton, Thomas (2007). Breakout Strategy: Meeting the Challenge of Double-digit Growth. McGraw-Hill Education. p. 200. ISBN   978-0-07-145231-1.
  8. 1 2 3 Relan, Peter (September 27, 2013). "Where Webvan Failed And How Home Delivery 2.0 Could Succeed". TechCrunch .
  9. ↑ G. Weinzimmer, Laurence. The Wisdom of Failure: How to Learn the Tough Leadership Lessons Without Paying the Price.
  10. ↑ Wolverton, Troy (October 30, 2001). "Seeking relics amid Webvan's ruins". CNET .
  11. ↑ Beltran, Luisa (June 26, 2000). "Webvan goes shopping". CNN .
  12. ↑ FISHER, LAWRENCE M. (June 27, 2000). "Webvan Will Acquire HomeGrocer.com". The New York Times .
  13. 1 2 3 Emert, Carol (July 15, 2001). "Venture lessons in Webvan collapse / Financing history a cautionary tale". San Francisco Chronicle .
  14. 1 2 RICHTEL, MATT (November 6, 1999). "Webvan Stock Price Closes 65% Above Initial Offering". The New York Times .
  15. ↑ "FORM 424(B)(1), Webvan Group, Inc". U.S. Securities and Exchange Commission. November 5, 1999.
  16. ↑ "Webvan pays off Shaheen". CNN . May 16, 2001.
  17. ↑ "Nevadans lose jobs at 'Net's Webvan". Las Vegas Sun . July 9, 2001. "The company's list of unsecured creditors will include Webvan's former CEO George Shaheen, who resigned in April, triggering a clause in his contract that required the company to pay him $31,250 per month for the rest of his life. With the bankruptcy, Shaheen "will have to get in line with the rest of our creditors," Grebey said."
  18. ↑ Delgado, Ray (July 9, 2001). "Webvan goes under / Online grocer shuts down -- $830 million lost, 2,000 workers fired". San Francisco Chronicle .
  19. ↑ "Webvan bags it for good". ZDNet . July 9, 2001.
  20. ↑ Sandoval, Greg (September 7, 2007). "Webvan delivers its last word: Bankruptcy". CNET .
  21. ↑ Cohan, Peter. "Four Lessons Amazon Learned From Webvan's Flop". Forbes.
  22. ↑ Lanxon, Nate (November 18, 2009). "The greatest defunct Web sites and dotcom disasters". CNET .
  23. ↑ Aboujaoude, Elias (2012). Virtually You: The Dangerous Powers of the E-Personality. W. W. Norton & Company. p. 54. ISBN   978-0393340549.
  24. ↑ Barr, Alistair (June 18, 2013). "From the ashes of Webvan, Amazon builds a grocery business". Reuters .
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.