Not every business is profitable. This has been reflected by the case of webvan.com as it is one the example of failure on the world of e-commerce.Webvan.com was a US online grocery founded by Louis Borders at 1999 which aimed to revolutionize the grocery business by taking orders online and delivering to customers' homes. Webvan.com grew and expanded vastly by offering good customer service via providing online representative to directly communicate with the customer. Unfortunately the company went down in year 2001 by layoff 2000 worker and this marked an end for one of the most ambitious attempts to create a viable online retailer.
One of the causes for Webvan.com’s fall is the exponential growth of the company in short period. The company has focused on short term profit rather than long term. Webvan.com has ignored the growth and market share which were important component to success in long term. It expanded the business too quickly into unfamiliar areas where they leveraged their business too liberally. This is shown by its move for expansion into 26 cities coverage market within a two to three year time. It had not attracted enough customers to justify its spending and to sustain its business operation.
In addition, Webvan.com has spent a huge amount on constructing infrastructure for expansion purpose. Webvan.com signed a $1 billion contract to build a string of high tech warehouse. By then, the company’s spending had exceeded its earning. This investment was greater then the company’s sales growth and affected the company’s financial liquidity. The management decision to purchase over one of its major competition has further worsen the liquidity problem of the company.
Finally, the company closed down in July 2001 after struggling financially for sometime.
Reference:
http://www.ecommercetimes.com/perl/story/947.html
www.swdsi.org/swdsi06/Proceedings06/Papers/EC01.pdf
http://en.wikipedia.org/wiki/Webvan
http://www.foodnavigator.com/Financial-Industry/The-online-grocer-Webvan-closed-down
http://www.allbusiness.com/technology/internet-technology/837414-1.html
http://news.cnet.com/Webvan-delivers-its-last-word-Bankruptcy/2100-1017_3-269594.html?tag=news.1
1 comments:
Fortunately, we have companies like http://www.i-booze.com that have followed in their footsteps!
Post a Comment