Webvan: The dotcom bubble’s biggest bust
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Of course if they could have raised money like Uber has then .....
I’d say times have changed, but I recently ordered alcohol shipped by GSO (a regional delivery co) and they just left the box on the porch without a signature.
I remember ordering produce for delivery and they allowed different ripeness of bananas so I would order one of each (green, ripe, etc ) just to see if they came and looked differently. This was back in the day of web commerce so fun to play with. Good times. I remember Pac Bell Park had all their seats with Webvan cup holders and scoreboard ads for Webvan too at the time.
In response to another comment, the pickers have access to the backroom and frequently deliver better produce than would be available in-store.
Amazing service. Terrible business model: boil the ocean, premature scale, hire the head of Andersen Consulting as CEO. Every bad, nonsensical decision.
And yet, the core was valid: a lot of people want their groceries delivered. When I went to business school a couple years later, the CMO of H-E-B spoke to my class (later, President) and I asked when they’d offer delivery. His response: “we believe people enjoy the experience of walking the aisles.” Well, Scott, whose parking lot is now 50% curbside pickup? Who spent 9 digits to acquire Favor? You’re welcome, you rich bastard.
It’s a good thing the grocery business had enough margin for error for these people to come around to learn the correct lessons from Webvan.
I'm not sure the economics of delivery (in a general context) work. Sure, there are folk who are time-poor, and cash-rich, and for them it makes sense, but for the rest the price either has to go up to reflect the cost, or the delivery cost has to be subsidised.
Curbside pickup is a happy medium ground. Picking the groceries is cheap, and the expensive part (delivery) is handled by the customer using their time and their car.
1. more people order, or
2. people order more items
Both, 1 and 2 can be influenced by marketing and delivery can become a revenue instead of a cost center.
Bonus points if that means that you can deliver from a cheap warehouse instead of an expensive supermarket.
Amazon makes more money with people on Prime, not less.
Business like this is 1% initial idea, 99% execution and cutting costs.
I don't enjoy "walking the aisles" at all. But I do want to choose the produce I buy myself rather than have a picker do it.
Also, I don't buy large amounts of produce at a time. I buy it the day I'm going to use it.
For those two reasons, a produce delivery service isn't of interest to me.
> These eager investors pushed the management of Webvan to grow as fast as possible.
I don't understand this. Why would you want to grow as fast as possible? Yeah there are economies of scale, but it seems like they were far from a point where that would kick in. Rather scaling made them lose money even faster. As a startup, you only have to grow faster than the competition. And it is not like you would be surprized by a competitor building distribution centers overnight. They should have better taken it slow and tried to become profitable before scaling out.
This is the early 2000s and deindustrialization is in full effect. If you want a cheap warehouse near a top tier city they weren’t hard to find. So it’s quite possible a competitor could surprise you and do a 10 city expansion overnight.
Everyone during this time was trying to ape the Amazon model. Which at this point still wasn’t profitable. No one was interested in going slow. Because there were irrational investors just looking to spend money on the next unicorn. If you weren’t taking it your competition would and you would be another dead company on a list.
Trust me, there is nothing rational about how money works. Even the experts who were expecting recession any day now have decided to shut up about it.
In retrospect it’s easy to see why a company failed: no viable plan, burn rate, expensive, etc. But a lot of it is just gambling and luck. We can could have worked. Cosmo could have worked. Yahoo could have bought Google. We’ll never know.
Because they thought their business model was so amazing that everyone would copy it, and thus they wanted to build and maintain a first mover advantage. They overestimated how much competition they would face and underestimated the logistical challenges of their model.
Short answer: to juice the numbers ahead of an IPO.
Long answer: In the short term companies need quick and dirty ways to get market share. Showing growth tells investors that they've established product market fit and opens the door to acquiring more funding to scale up.
Once public, the stock market will be forgiving of fast growing but unprofitable companies offering the distant promise of massive profits.
kozmo.com (https://en.wikipedia.org/wiki/Kozmo.com) was another one that was ahead of its time.
I was just thinking this weekend about that in fact: was wondering who’s idea it was and if they got recognition for the idea or not.
https://en.wikipedia.org/wiki/Supermarket_Direct
> Supermarket Direct was a pioneering online grocer, providing a home grocery shopping and delivery service in London from October 1995. The company sold Sainsbury's-provided groceries until it was bought by Somerfield and integrated into the Somerfield Direct home shopping service
https://en.m.wikipedia.org/wiki/Schwan%27s_Company
> The Schwan's family maintains 100 percent ownership of Minnesota-based Schwan’s Home Service, a privately held, independent entity traced to the company’s home-delivery business launched by Marvin Schwan in 1952. Schwan's Home Service sells frozen foods from home delivery trucks, in grocery store freezers, by mail, and to the food service industry. As of 2022, Schwan's Home Service will be rebranded as Yelloh.
A lot of dot com companies during the bubble had none of that. An MBA with a silly/incoherent idea and a half baked website were all it took to get funding. VCs were throwing money at anything that had a website at some point. They were desperate to get some of the action. Most of those companies were literally created to tap into that kind of stupid money. The dot com bubble was VCs throwing money at absolutely bat shit crazy stuff; and then losing badly when the bubble burst. This wasn't that bad in comparison.
I mean WeWork isn't that different. Or Uber. Or Air BnB. Rapid growth funded. Arguably all cases where the investors maybe got a bit too greedy but also companies that are generating real revenue out of markets that do exist with a service that consumers are willing to pay for.
Sounds strangely familiar
It's a “supermarket on wheels”. Every city has a distribution point and small electric cars bring the groceries to your front door at a time of your choosing.
After the launch of Picnic, the other players had to catch up by starting their delivery services.
In the UK all major supermarkets do their own delivery, where at least parts of it can be automated
Eventually a shake out will happen and whoever is left standing can start making lots of money.
Will Uber make lots of money? I doubt it.
I'd say that it's pretty apt, that it's all running on VC money for market share. There's a reason that before mobile devices the only restaurants that offered delivery were pizza & Chinese.
Why did pizza places and Chinese food places offer delivery, in your opinion?
Never heard of this company before but found this very interesting. Good read.
Public companies can raise money by selling shares in a registered direct offering, or doing a PIPE (private investment in public equity). They can even register to sell new shares directly on the market (called ATM). But if there are not enough buyers, it doesn’t help to keep printing shares.