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M. KAMRUL HASAN RASEL
MBA, 7TH
BATCH
4TH
SEMESTER
ID: BG 163071 240
(CUCBA)
 
 WEBVAN was an online "credit and delivery" grocery
business that went bankrupt in 2001 after 3 years of
operation and was later folded into Amazon.com
 It was founded in the heyday of the dot-com boom in the
late 1990’s
 It was headquartered in Foster City, California USA, near
Silicon Valley
 It delivered products to customers' homes within a 30-
minute window of their choosing
 At its peak, it offered service in ten U.S. markets
 Approximate burnout US$ 1 bn
 Number of employees 3,500 at peak
Online ://www.webvan.com
 San Francisco Bay Area
 Dallas
 San Diego
 LosAngeles
 Chicago
 Seattle
 Portland
 Atlanta
 Sacramento
 OrangeCounty
o Webvan wasfounded by LouisBorders,theco-founder of the
Bordersbookstorein 1971
o Webvan'soriginal investorsincluded Goldman Sachsand Yahoo
o Investment Bankerssuch asCBSInc, Knight – Ridder Co, Softbank
Co of Japan
o Benchmark Capital and SequoiaCapital ventureCapital firms.
o GeorgeShaheen wastheCEO, who also served astheCEO for
Andersen Consulting
o Arvind peter Rolan Snr VPTechnology from Oracle
o Mark Zaleski from Federal Express
o Vivek Joshi VPProg Mang from GE Transportation
o Systems.
Bankruptcy
The company lost over $800 million
and shut down in June 2001, and laying
off 2,000 employees.
As part of its shutdown process, all non-
perishable food was donated to local
food banks
Why did this business fail so spectacularly?
the reasons ere
Expectation werenot realistic
Predictionswerenot converted into sales
Over emphasison Technology
HugeCapital intensivecosts
Surfacestudy wasdonewithout seeing theground
realities.
Expansion isnot alwaysthesolution.
Where Webvan Failed ….???
Mistake No. 1: Wrong Target Audience
Segmentation And Pricing
Mistake No. 2: Complex Infrastructure Model
Mistake No. 3: Too Much Money, Expanded Too
Fast
What was supposed to happen? On what basis Webvan’s founders
and initial investors hoped for success of their venture?
TheThought Plan
A simpleand hasslefreeapproach wasdesigned for grocery
shopping
Thegood that wereordered could bedelivered within aspecified
30 min window upto max of 4 days.
TheDistribution would operatefor first 5 quartersbeforethe
profit could beshared.
Audiencefrom thelocal areawould bethefirst target. Once
successful, they could moveahead with theexpansion of its
servicesto alarger market.
Inventory turnover expected figureof 24 timesannually as
compared to 9-11 timesin traditional supermarkets.
Expectations from the Plan
To offer best quality productsat thecheapest priceby click of a
button.
No competition for aweb enabled grocery storestructure.
Many high profilepeoplefrom variouscompanieswere
appointed to support thegrowth of Webvan.
Study conducted in San Francisco, assured Webvan that 35 %
of themarket would buy groceriesover theinternet.
ThisWebvan group also identified theinconveniencespeople
faced during grocery shopping.
What could the company have done differently to increase their
chances of success?
It should not havedependent on economiesof scalejust in the
beginning
Capital Intensiveapproach increased thefixed inventory carrying
cost though thebreak even point
Wrong estimation of demand lead to wrong investment estimates
Non availability of delivery channel though it wasthere.
Grocery itemsincludemoreperishableitems. Attention wasnot
paid to largenumber of perishableitemsand their handling and
delivery
Automation doesnot mean cost saving.
Do you think that large numbers of people will ever buy
their groceries over the internet? Why or why not?
Peopledo not want to pay delivery charges
Everyonedemanded high servicestandards
Going to agrocery storeon aweekly basiswashighly ingrained
behavior
Survey by thecompany in San Francisco to learn about how
many peoplewould belikely to usean onlinegrocer
 6% - absolutely
 23 % - probably
55% of all Americansconsidered timeto betheir most precious
commodity said “consumersapparently put littleeconomic value
on their timein thesupermarkets”
What lessons do you take away from the Webvan story
about the “dot-com era”?
i. Resources do not mean results
ii. Surface study should be embedded with ground
realities
iii. InfiniteExpansion CreatesInfinitedilution
Technology wise Webvan was ahead of the
competitors, market and time, but it didn’t have and
couldn’t get enough customers to use profitable all of
that automated infrastructure.
Now they forgotten word of “Think Big & Grow
Fast”, now the most popular acronym in Silicon
Valley is “Minimum Viable Product” .
Webvan case study

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Webvan case study

  • 1. M. KAMRUL HASAN RASEL MBA, 7TH BATCH 4TH SEMESTER ID: BG 163071 240 (CUCBA)  
  • 2.  WEBVAN was an online "credit and delivery" grocery business that went bankrupt in 2001 after 3 years of operation and was later folded into Amazon.com  It was founded in the heyday of the dot-com boom in the late 1990’s  It was headquartered in Foster City, California USA, near Silicon Valley  It delivered products to customers' homes within a 30- minute window of their choosing  At its peak, it offered service in ten U.S. markets  Approximate burnout US$ 1 bn  Number of employees 3,500 at peak
  • 4.  San Francisco Bay Area  Dallas  San Diego  LosAngeles  Chicago  Seattle  Portland  Atlanta  Sacramento  OrangeCounty
  • 5. o Webvan wasfounded by LouisBorders,theco-founder of the Bordersbookstorein 1971 o Webvan'soriginal investorsincluded Goldman Sachsand Yahoo o Investment Bankerssuch asCBSInc, Knight – Ridder Co, Softbank Co of Japan o Benchmark Capital and SequoiaCapital ventureCapital firms. o GeorgeShaheen wastheCEO, who also served astheCEO for Andersen Consulting o Arvind peter Rolan Snr VPTechnology from Oracle o Mark Zaleski from Federal Express o Vivek Joshi VPProg Mang from GE Transportation o Systems.
  • 6. Bankruptcy The company lost over $800 million and shut down in June 2001, and laying off 2,000 employees. As part of its shutdown process, all non- perishable food was donated to local food banks
  • 7. Why did this business fail so spectacularly? the reasons ere Expectation werenot realistic Predictionswerenot converted into sales Over emphasison Technology HugeCapital intensivecosts Surfacestudy wasdonewithout seeing theground realities. Expansion isnot alwaysthesolution.
  • 8. Where Webvan Failed ….??? Mistake No. 1: Wrong Target Audience Segmentation And Pricing Mistake No. 2: Complex Infrastructure Model Mistake No. 3: Too Much Money, Expanded Too Fast
  • 9. What was supposed to happen? On what basis Webvan’s founders and initial investors hoped for success of their venture? TheThought Plan A simpleand hasslefreeapproach wasdesigned for grocery shopping Thegood that wereordered could bedelivered within aspecified 30 min window upto max of 4 days. TheDistribution would operatefor first 5 quartersbeforethe profit could beshared. Audiencefrom thelocal areawould bethefirst target. Once successful, they could moveahead with theexpansion of its servicesto alarger market. Inventory turnover expected figureof 24 timesannually as compared to 9-11 timesin traditional supermarkets.
  • 10. Expectations from the Plan To offer best quality productsat thecheapest priceby click of a button. No competition for aweb enabled grocery storestructure. Many high profilepeoplefrom variouscompanieswere appointed to support thegrowth of Webvan. Study conducted in San Francisco, assured Webvan that 35 % of themarket would buy groceriesover theinternet. ThisWebvan group also identified theinconveniencespeople faced during grocery shopping.
  • 11. What could the company have done differently to increase their chances of success? It should not havedependent on economiesof scalejust in the beginning Capital Intensiveapproach increased thefixed inventory carrying cost though thebreak even point Wrong estimation of demand lead to wrong investment estimates Non availability of delivery channel though it wasthere. Grocery itemsincludemoreperishableitems. Attention wasnot paid to largenumber of perishableitemsand their handling and delivery Automation doesnot mean cost saving.
  • 12. Do you think that large numbers of people will ever buy their groceries over the internet? Why or why not? Peopledo not want to pay delivery charges Everyonedemanded high servicestandards Going to agrocery storeon aweekly basiswashighly ingrained behavior Survey by thecompany in San Francisco to learn about how many peoplewould belikely to usean onlinegrocer  6% - absolutely  23 % - probably 55% of all Americansconsidered timeto betheir most precious commodity said “consumersapparently put littleeconomic value on their timein thesupermarkets”
  • 13. What lessons do you take away from the Webvan story about the “dot-com era”? i. Resources do not mean results ii. Surface study should be embedded with ground realities iii. InfiniteExpansion CreatesInfinitedilution
  • 14. Technology wise Webvan was ahead of the competitors, market and time, but it didn’t have and couldn’t get enough customers to use profitable all of that automated infrastructure. Now they forgotten word of “Think Big & Grow Fast”, now the most popular acronym in Silicon Valley is “Minimum Viable Product” .