They got big fast, but size turned out to be an albatross when the demand wasn't there." "But what they hoped was going to be their advantage turned out to be their downfall. "They spent so much money on all this infrastructure, which was basically part of their business model," Kathman said. But Webvan never raked in enough sales to make up for its initial expenses. The idea was that technology would help the firm provide groceries more cheaply than brick-and-mortar competitors like Safeway, which had to pay for more employees and expensive real estate in downtown areas.
RAY DELGADO VENTURE LOGISTICS SOFTWARE
Webvan invested heavily in automated warehouses, logistics software and a fleet of vans. "If something goes wrong and you fall short, you're in much worse shape than if you held back and tried to grow modestly." "Webvan and Etoys will be two lessons studied in business schools for years to come about the perils of setting expectations too high and locking yourself into those expectations," Kathman said. Like toy retailer Etoys, which went kaput after disappointing holiday sales last year, Webvan was a victim of the dot-com "get big fast" mantra, said David Kathman, a stock analyst at Morningstar in Chicago. Webvan recently pulled out of the Atlanta and Dallas markets and drastically scaled back its Sacramento operations in an effort to conserve its dwindling cash reserves. As a concept and a business model, we believe that we have made a difference."Īlthough the company had pledged to find its way in the sluggish Internet economy, its demise was not unexpected. "But at the same time, we're very proud of what we've accomplished. "It's a very emotional time for everyone who's been involved with Webvan because we've put our heart and soul into this and now it's gone," said Bud Grebey, Webvan spokesman. Service was also immediately terminated to over 750,000 active customers in seven markets - San Francisco, Los Angeles, Orange County, San Diego, Seattle, Chicago and Portland. More than 2,000 Webvan employees were let go today. Our store is temporarily unavailable while it is being updated. The company's Web site was also shut down on Sunday, telling customers "We're sorry. Webvan's board of directors voted to close the company on Friday, but the company didn't begin to close its distribution centers until Sunday. But the Foster City company was never able to attract and sustain the kind of customer traffic that would make it profitable, bleeding at least $830 million in losses until it was left with only about $40 million on hand as of June 30.
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