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An example of an E-commerce failure and its causes
Posted by PIRATES in UTAR
on
7:38 AM
in
Chui Wei
There are many dot-com failures which are pet.com, mvp.com, boom.com and etc. The dot-com failure that will be discussed here is Webvan.com.
Webvan.com was founded in 1999 by Louis Borders. It was a website that sold groceries such as bread and vegetables in the US. It had spent around $1bn within 18 months to build its own infrastructure to deliver groceries in a number of cities, spent almost half of a billion by going public and bought over one of its largest competitors-HomeGrocer. However, by 2001, it had announced went into bankruptcy and caused 2,000 its employees lost their jobs.There are many reasons for Webcan.com failures:
1) An incorrect business model
The company was presumed that it was a technology business and not a grocery business.2) Lack of management experience
Webcan.com was an online super-market but it was run by consultant, officers and directors who lack of management knowledge and retail food experience in the supermarket industry. Even its CEO George Shaheen did not have little or no food related experience and its founders, Louis Borders was an expert in selling book, but books do not expire or spoil.
Webcan.com was an online super-market but it was run by consultant, officers and directors who lack of management knowledge and retail food experience in the supermarket industry. Even its CEO George Shaheen did not have little or no food related experience and its founders, Louis Borders was an expert in selling book, but books do not expire or spoil.
3) Lack of understanding of the sociology and psychology of retailing food
Webvan.com’s management did not understand the style of consumers shop for foods. Most of the consumers like to go to supermarkets to look at, feel and
touch the merchandise. They like to speak to the grocer, wine department manager or butcher to negotiate the price or get more information about the merchandise. Besides, Webvan.com tried to implement a total customer satisfaction model by delivery the merchandise ordered to customers within 30 minutes. However, they did not consider that many working customers would like their groceries to be delivered at home at night.
Webvan.com’s management did not understand the style of consumers shop for foods. Most of the consumers like to go to supermarkets to look at, feel and
touch the merchandise. They like to speak to the grocer, wine department manager or butcher to negotiate the price or get more information about the merchandise. Besides, Webvan.com tried to implement a total customer satisfaction model by delivery the merchandise ordered to customers within 30 minutes. However, they did not consider that many working customers would like their groceries to be delivered at home at night. 4) Erroneous target marketings
Webvan.com had targeted on wrong customers, it targeted on soccer moms and upscale suburban families. The most obvious potential customers for Webvan’s services were senior citizens, mothers with very young children, college students, handicapped individuals and late-night workers.
5) Lack of demographic understanding
Webvan.com’s major warehouses were located in Atlanta and Los Angeles, where the citizen are used to driving and rather drive to a shop or a store to get the groceries than to wait for delivery at home. Only those couples who both work and who hailed from congested metropolitan areas suited to Webvan.com’s idea.
Reference:
http://en.wikipedia.org/wiki/Webvan
http://www.turnaround.org/Publications/Articles.aspx?objectID=1802
http://crave.cnet.co.uk/gadgets/0,39029552,49296926-6,00.htm
