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Case Study: Webvan

Case Study: Webvan. Julian Dominguez Lauren Bergam Aryn Versteegh. Executive Summary. Founded in 1997 Online grocery store Strong management and board of directors Over $400 million in initial capital Focus on efficiency and precision Aggressive Expansion Declared Bankruptcy in 2001.

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Case Study: Webvan

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  1. Case Study: Webvan Julian Dominguez Lauren Bergam ArynVersteegh

  2. Executive Summary Founded in 1997 Online grocery store Strong management and board of directors Over $400 million in initial capital Focus on efficiency and precision Aggressive Expansion Declared Bankruptcy in 2001

  3. What did Webvan Envision? Optimistic financial projections Exploitation of a specific demographic Hopes for nationwide expansion Move beyond grocery products

  4. Why Webvan Failed • Over-preparation • DCs too large • Incorrect estimations • Poor financial decisions • Unnecessary spending due to large startup money • Bought out HomeGrocer • Inefficient system • Transportation route density • Small margins need low cost for success • Automated carousels

  5. IS Strategy Triangle

  6. Improving Competitive Advantage • Slow growth down, drastically • Saves capital • Keep DC’s operating at capacity • Focus on initial DC • Develop and test success in Bay Area • Offer more products initially

  7. Improving Competitive Advantage Cont. • Capture more of the market • Cost leadership/Differentiation (more) • Aggressive marketing • Start prices at/below cost to capture more market • Market Penetration

  8. Was Webvan Too Ambitious?

  9. Was Webvan Too Ambitious? • Too ambitious, not realistic • Did not account for all contributing factors • Underestimated demand • Overestimated efficiency of their system • Quote • Over-preparation “weighed down” the company with expenses • Overhead costs caught up to them

  10. What could Webvan have done differently? Reach other demographics Earlier implementation of Webvan@Work Reverse product introduction plan Look for inspiration from others in industry Customer rewards program

  11. Will large numbers of people ever buy groceries over the internet?

  12. Online Groceries a Societal Norm? • With current society, very unlikely • Supermarkets are a convenient routine • Competitive: location, sales, atmosphere • Ingrained behavior • Physical stores appeal to many people • Customers pick out their own produce • Coupon cutters, shop for deals • Social interaction • However, demand can be “large” enough to support a well-run company • Low startup costs • Efficient, lean, low running costs

  13. Lessons Learned • Accurately gage demand in market • Current demand • Is it flexible? • Create a plan that captures this demand • Underprepared: lost opportunity • Over-prepared: Webvan, under capacity • Be realistic in expansion and expectations • Adapt to fluctuations • How and why demand fluctuates • Think long term

  14. Lessons Learned About “Dot-Com Era” Good idea does not equal success. Capability does not necessarily warrant action. Pay attention to details

  15. Questions?

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