Abstract
In 2008, when CNET published its list of the top ten dot-com flops ever, online grocer Webvan topped the list. This chapter describes the rise and fall of Webvan, and analyzes the reasons for its failure. In particular, this case study demonstrates that Internet companies – contrary to what many entrepreneurs believed during the dot-com boom – are not immune to the basic laws of economics or sound business practice. Issues that are discussed include lack of knowledge of the grocery business, high efficiencies and low profit margins in the traditional grocery business, lack of consumer testing, inability to access a strong supplier market, cost of and problems with innovative and highly automated warehouses, the economics and logistics of home delivery, the “get big fast” philosophy of dot-com entrepreneurs, the failure of other early online grocers such as Kozmo and UrbanFetch, and the growth of successful online grocery businesses by such companies as Peapod and Tesco.
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