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Webvan Out Of Gas
Alowishus writes: "Looks like it's the end of the road for Webvan. Their website appears to be down, and Oakland local news reported employees clearing out their possessions from the company's warehouse. A press conference is scheduled for Monday." First kozmo.com, now this -- I'm giving up hope on ultra-cheap delivery by web as a business model to support my retirement fund. Perhaps Peapod can buck the trend, though.
There are plenty of surviving home-delivery services out there that either accept a shopping list via the phone, or come to your house and pick it up. Then, they shop for you and deliver your groceries, charging you a premium for the service. I would think that webvan could have struck a deal with the local grocery stores that allowed them to charge a lower premium than the non-web-based services. Most people would still pay the premium to have their shopping done for them. In fact, I know of plenty of satisfied customers from the Atlanta area, before it shut down.
So what's the scoop here? Why are businesses like this having so much trouble? No ENOUGH business? Or just stupid management?
GreyPoopon
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GreyPoopon
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Why is it I can write insightful comments but can't come up with a clever signature?
But seriously I just read in the Economist how Tesco is teaming with Safeway to build a profitable grocery delivery service. It's based on picking the groceries out of existing stores and not expensive new warehouses. It's been very successful (profitable) in Britain. Unfortunately the article requires a paid online subscription to the magazine, but it shows there is hope.
GreyPoopon
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GreyPoopon
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Why is it I can write insightful comments but can't come up with a clever signature?
The key to Tesco's success is twofold. First, it's already a well-known brand -- it's our largest supermarket chain. And secondly, it distributes the goods from existing stores, so no extra warehouses etc. to build. (Our second largest supermarket chain, Sainsbury's, tried and failed to make the warehouse model work.)
11.0010010000111111011010101000100010000101101000
A service that a few of the grocers are now offering is an ExpressLane. You give them a list, and 4 hours notice, and they'll get all the stuff, bag it, and have it waiting for you. They even have a special checkout line. There is generally a $5 service fee, but you can do 30 minutes worth of shopping in 5 minutes. And you just stop by on your way back home from work. Minimal alteration of your daily activities.
As an added bonus, at least where I live, I get to say I went to Harris Teeter. And I really like saying "Teeter"
- Dan I.
They quickly figured out that service costs money, and did a SprintPCS-style turnaround. (If you've been a customer for more than a year and have tried dealing with customer support, you know exactly what I mean.) They figured out that they could serve more people more quickly if they dropped all but the base required service. Now, drivers are instructed to deposit items just inside the door and scram, excepting special circumstance. In their larger markets, they no longer shop a large grocery store, but a little warehouse which usually only contains a small subset of the items which are listed on their web site, which means that you typically won't get a substantial number of things you ordered, requiring you to head on down to the grocery yourself. The "shoppers" (I'm unsure of the new title) are not only no longer instructed to contact customers, but no longer allowed. They're timed on how long they have to complete each order, which is a fraction of the time previously alotted.
I was still a Peapod user throughout the changeover, and orders went from being typically 95%+ fulfilled to around 50-60%, with absolutely nothing included that you wouldn't see in the main 3 aisles of your typical grocer. Peapod's response to comments on the site and service and notes about errors on the web site went from personal responses to "Thank you for your idea, little man. Please be placated by the following runaround," and defensive form letters stating that they were in no way legally responsible for any errors on the site, and "please contact this number to be run around in circles by someone with vapid marketroid scripts until you give up if you've got something that you foolishly think needs fixing."
It's unfortunate. Peapod used to be a pretty nice service, but I can't see using it anymore unless you've got really generic tastes, are disabled, or are somehow incapable of shopping for yourself.
Now - I tried WebVan a few times. They continued to take their time, knocking themselves out to make everyone happy. They really never got to the point of optimizing customer service out of their operation.
We have a service called HomeRuns that seems pretty successful here in Boston. I can't attest to their business model and how it differs from WebVan, but every day it seems that I have to dodge their army of delivery trucks on my bike.
"My mother never saw the irony in calling me a son-of-a-bitch." - Jack Nicholson
Would you pay a higher premium for better customer service? How much of a higher premium would you be willing to consider?
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
For those unfamiliar with Webvan, is/was an on-line grocery store. You went to their site, ordered your groceries, picked a delivery date/time and your groceries were delivered. They tried to get economies of scale by using a large warehouse to store, pick and ship the orders.
People tried them once, because they were novel, new, and their neighbors mentioned them at parties. That didn't translate into regular, large orders that Webvan needed to be a viable business.
There were a number of things that contributed to their demise:
1. Price - Food is a large part of most budgets, even for the folks Webvan targeted. Discounting is very much part of the grocery business, and Webvan didn't play that game. High margin items, such as soda, were cheaper at stores than on Webvan. The major chains have made shoppers very price sensitive, and Webvan was viewed at the upper end of the price range (whether they were or not is irrelevant), which meant people would use them in a pinch, but still went to the store for their major purchases.
2. Order Size - Grocery shopping is really impulse buying - stores want to get you in with a few specials, to get you to walk through their store. They know you'll see other items you need, adding to the total sale per customer. Even if you go in with a list, you probably would find a few things you needed that you forgot. Webvan, because of its web-based model, wasn't really good at capturing the impulse buy that drives the total sale. Much of the buying is touch and feel - people like to see the meat, fruit, and vegetables and pick what they like. Yes, Webvan would refund the money, but that doesn't do you much good when your trying to make a salad and the vegetables aren't up to your standards (although I must say everything I got from Webvan was fine - but they still need to overcome the feeling that I must see it before I buy it).
3. Advantage over stores - While it was great that Webvan delivered, they completely missed the "I need it now" market. That may have been smart, because cost of delivering a carton of eggs and some milk would be kill any profit on the order. (Webvan did add a delivery charge for small orders near the end) However, since I still had to run to the store to get one or two items, it was just as easy to make a list of other things I needed as well. This meant there was no compelling reason to use Webvan, since it really didn't cut down significantly on trips to the store.
4. Convenience - Scheduling delivery was hard - next day service was rarely available, forcing people to plan 3-4 days in advance. It's just as easy to sneak in a trip to the store.
In short, Webvan offered no clear advantages to going to the store that made buyers switch to them. Retail stores could even adopt parts of Webvan's model, making their position even weaker. In Atlanta, several stores even offered fax/online/phone ordering - they would take and pack the order for your pickup - one even offered drive through pickup.
Finally, Webvan failed to learn from history. Home delivery of groceries is nothing new - there are services that will stock your pantry on a regular schedule. Sometimes there is a reason why a business model hasn't been a roaring success - their aren't enough customers. Scaling up a business model that hasn't been successful in the past and wrapping the web around it doesn't change the fundamentals.
I'm a consultant - I convert gibberish into cash-flow.
Now we're not sure if we should wait or order from Peapod...going to the store is simply not an option :)
---- Sigs are bad for your health ----
Give a hand, not a hand-out.
Are these people still locked up in the house? Maybe they better get rescued cause it looks like they are all going to starve to death now!
You can ski down their stock price chart!
Consequently, why am I being told to "slow down, cowboy!" when the last time I posted was about a week ago? Argh.
These seem to be pretty good vehicles for delivery. They have absolutely NO product. They just place your order with a local restauraunt, pick it up, deliever it, and take your cash. Seems to be that they could expand into a generic delivery service with a bit of effort.
Did we not all see this one coming? Come on, anyone who's ever taken accounting knows that the margins on groceries are tiny (4%-5% vs the ideal 9%-12% for public corporations). Through in the number of times Webvan almost fell, and it is no surprise that they are closing up shop. What is surprising is that they made it this long.
Here in Toronto, we never had Webvan, but we've got a great copycat called Grocery Gateway. These guys are unreal - and let me tell you, it has *nothing* to do with delivering groceries.
For example, their delivery windows are only 1 hour wide - so no mint chocolate chip ice cream sitting on your porch. The drivers (what are they paying these guys!?) are customer service freaks - if they think they're going to be even 1 minute late, they call you and let you know. If you go nuts and tell them they suck (not that I ever did), they calmly ask you to please call the customer service number.
Then the real service shines. The customer service reps are the exact opposite of everything you've every experienced. They are nice, polite and best of all, they give you free groceries. In the case above, my whole order was free, because it arrived 2 minutes after the delivery window I selected.
It makes me wonder what the Webvan experience was like. Not enough repeat customers? What did they charge anyway?
Feed the beast.
after a few months of trying peapod (years ago, before they had a Net presence and you had to dial into their modem bank, ONLY) I dropped them.
its good for when you're home sick for extended periods of time (flu season) but other than that, I saw no real savings in time since I still had to go out myself for the cold goods.
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"It is now safe to switch off your computer."
I've used WebVan several times and I thought they had wonderful service. In fact, I don't think I've ever talked to anyone who's used the service and wasn't satisfied.
:)
The problem WebVan had was just atrocious management. I've never worked for WebVan, but it's obvious from how they were doing things that they were doomed from the very beginning.
For instance, they never gave their Bay Area delivery service time to become profitable before expanding into other areas.
As another example, WebVan purchased warehouse space in several locations they didn't service in anticipation of setting up shop there.
I really believe in the idea WebVan had. If properly managed, I think it could be very successful. Now if only I had some capital to start things up with.
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All opinions presented here aren't mine.
I would be willing to pay a little more for home delivery, as long as it is reliably done when promised. Given the poor quality so many businesses under pressure from venture capitalists have gone to, I would worry that they would be able to keep it up. But making the margin so high that for my order to be way more than the cost of driving to the regular grocery store would have soon become a serious negative. If their costs for delivery and e-commerce were too much, they would have a problem. But they would have to be quality, too.
Did they have a means for you to add on to your order if it was still N hours before delivery?
That's likely a problem for them. Even if they could make a profit or break even or absorb the loss to keep you as a customer for later profits, on the small order with your list added on, the time to deliver from the one big warehouse would still be a negative. What would be needed is for it to be scaled up to enough customers to have distribution centers located closer to customers to make it a rapid delivery service. My grocery store is close because within 2-4 miles of there is enough market, even with 2 or 3 other stores around, to make their profit. The grocery business does require large consumer markets.
That could certainly hurt them. Next day should have been a standard, with special premium emergency delivery for a fee.
The web really could be an improvement to the model. Instead of calling on the phone and dealing with a person or a stupid answering machine, the web, if done right, could be better than that. You could see the products in pictures, which is better than not seeing it at all, though not as good as picking it up and making sure it's really what you want. But this particular kind of B2C model can't really replace regular grocery stores any time soon. Pizza and sub deliveries succeed because people are willing to pay the extra amount (and the place in Dallas I get pizza from is especially good) for quick delivery. If home grocery delivery might succeed, it might be the result of growing up from these businesses. But it may never be cheap, so we should not expect it to take over.
Same here. Isn't it ironic that people that buy gibberish have so much of the cash to flow out?
now we need to go OSS in diesel cars
.. if you cut out the middleman.
For this business model to be truly effective, it's going to have to be the stores themselves that take the orders, assemble them, and then deliver them to the customers. A big part of the problem is that these places either have to have their own stock in warehouses (which is problematic for several reasons) or go out to somebody else's brick-and-mortar store and do "custom shopping" (which is not terribly practical.)
On the other hand, if you're the owner of an actual supermarket, a lot of these problems are solved for you. You've got all the items on hand already, and you presumably have a small army of skinny earringed teenage punks (making slightly over minimum wage) at your disposal. So have a couple of them spend their time doing nothing but filling orders placed online. Charge the customer the normal price that they would pay if they were to actually visit the store, and then tack on a surcharge to cover labor, fuel, vehicle maintenance, etc.
A company like Webvan that does nothing but delivery of Internet orders might work in the future, but in the here and now you've got to have some existing infrastructure to make the whole venture viable (and profitable.) As home delivery of groceries becomes more popular (and given people's preoccupation with things that make their lives easier, there is no reason to believe that it won't), it will be easier for these companies to turn a profit.
We're going down, in a spiral to the ground
I seem to remember them increasing their delivery charges a while ago, and they're still struggling, but they're not out of business yet.
www.lucernesys.comHorizon: Calendar-based personal finance
Many of the dotcoms (I worked for one, and I speak of what I want through) felt all of the old business models were invalid. Well, the rules bent when new companies were flooded with what seemed to be an unending supply of capital, but when that bubble burst, a lot of folks got bit in the ass. Webvan raised $375million in it's IPO, only to crash 2 weeks later. And this was before the big bubble burst on Wall Street.
Groceries are a tough business. You get maybe a 4% margin on things. It's almost better to put your money in a passbook and draw 2% or 3% at zero risk.
But it takes time for people to change their habits. If you are a .com that bets on make-it-or-break-it in three years, that's not going to work.
Web ordering of groceries and home delivery should have started locally and in specialty populations: homebound individuals, company groceries, busy upscale single professionals (BUSPs?), people living in Manhattan, etc. Companies can and should make sure every step along the way that they break even. Then, their user populations will naturally tend to expand as more and more people discover the convenience and habits adjust. A tie-in with cheap handhelds for making grocery lists in the kitchen (where the computer normally isn't) would also have helped.
I hope Peapod will be able to stick with it and that others will not be scared away by this. Webvan failed because they wanted to grow too fast; the idea was and is fundamentally sound.
In the twin cities, (Minnesota, USA), we have a company called Simon Delivers, that's doing extrodinaryly well. All my friends use them, and grocery's are easy as ever. (They have a 1000+ person waiting list ) The thing about simon though it th at they are NOT ON DEMAND. You go online, buy your grocerys, and than at your schdeuled time they come and give you your grocerys. IT's really cool, and so far it's worked for them. http://www.simondelivers.com And no, I do not work for them, I jsut think it's really cool. Here in MN it works. HA!
That's just it - so many dot-com businesses confused the ordering mechanism ("Yay! I can use the Internet to order products!") with a business model.
But a real business model is focused on how you can extract profit from what ever endeavor your business is engaged in. Profitability is the bottom line in any business, whether it's a 7-Eleven, a fertilizer plant, or a game company.
So many dot-com outfits bit the dust because they missed this Business 101 fact. Sure, some of them had bad management, but who had any management experience in the world of online commerce before there was any online commerce?
My guess is that now that the first wave of front-runners has died off, the hardier surviors are going to continue to grow and thrive, but at a sustainable, more realistic pace. All those "stupid" managers will be a lot more experienced, and like any industry, the world of online commerce will mature as effective practices become more well-known.
Read the EFF's Fair Use FAQ
Schwans has been around for decades, they deliver to your door, and if you want to add/change something at the last second (I.E. when the man is standing in your doorway with your food) you can easily. Granted it's only frozen products but then what the heck are geeks doing eating fresh veggies? If you want to create a web-groceries store.. let me send my order and allow me to stop and load/pick it up on my way home. (Meijer stores... you listening??? I'd pay a 10% charge for their employees to collect my shopping list for me so I dont have to wait in line, listen to that woman with 80 children scream at them for doing nothing, and smell that person in front of the line arguing about 12 cents on the recipt.
Do not look at laser with remaining good eye.
If there were a sufficient market for home grocery delivery BEYOND the established need that is met by conventional grocery stores employing an interesting technological marvel known as the AUDIO TELEPHONE then grocery chains would have been developing it well in advance of the internet. Instead, if you look at the trends in groceries you see things going the other direction - less groceries offering delivery service, bagging service, even self-serve check-out is on the rise. A service where someone collects and fills your order and then delivers it to your door is clearly on the extreme opposite end of the spectrum from this trend. So what is it these internet entrpeneurs know that companies that have been in the grocery business for decades don't? NOTHING. Because they're fucking morons.
And yeah, yeah, you can say, hey, 'Jath, is it worth getting so up in arms about another stupid, moronic, idiotic internet business model that failed? Where do you think the tech stock meltdown that helped precipitate the current economic downturn came from? Every worthwhile tech business that took a beating in the market ought to send webvan.com an e-mail that says "thanks for ruining it for real companies, assholes." Nothing like a little stupidity and greed.
It Is the Nature of Information to Transgress Artificial Boundaries
Sure, if you can hack double-black-diamond slopes ;-)
Oh... The Days.
Pimply faced freshman dropping out for 50k entry level jobs. "B2C petstore play"s. The first day pop. Office casual. The company game room. NASDAQ 5000. Exasperated recruiters. Hailing the new economy. Planes trailing banners with ads for jobs. BMW or Mercedes offered as choice at hire-time. Renaming stadiums. Venture capitalists. Pre-IPO stock options. Pundits predicting Dow 30000. Bashing the old economy. Lavish parties. Companies like Webvan.
Did I leave anything out?
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
Maybe I'm in the minority, but I can't be bothered to shop on price in the grocery store. Who fucking cares if a bag of potato chips is fifty cents off? My time is worth far more than that. Guess not enough people agreed with me.
Plus, their service was always extremely friendly, again unlike at Safeway. Again, I guess not enough customers cared about that.
sulli
RTFJ.
Do you mean the dotcomguy?. html
t co mguy.update/
The experiment managed to last the whole year 2000
as the InterNet business crashed and burned.
See http://www.wired.com/news/culture/0,1284,40940,00
http://www.cnn.com/2001/TECH/computing/01/02/do
For some sorts of operations, that makes sense. If my product is an electronic download, anyone in the world who has an internet connection can receive my product. For lightweight, non-perishable products, the postal service or its competitors can provide delivery cheaply enough that people won't squawk over the price of delivery. For groceries, delivery is expensive, and the more areas you cover, the more it costs.
So Webvan tried to become a national player, when no grocery chain had succeeded yet, instead of concentrating on capturing enough of the Bay Area market to make a profit. So it's gone tits-up.com. Oh well.
Instead, what they did was they spent half their money going into EVERY market, and then the rest ran out before they had a chance to iron out the kinks in their business plan. Web based ordering CAN work, the question is how. Maybe it's just a niche market, requiring that people come to a physical location to pick up their orders or a gross markup for delivery. I'm sure there are those out there (the disabled, for example) who would be willing to pay for that kind of service. Alternatively, maybe Webvan really WAS on the right track, and would have gathered a large enough customer base by next year to be profitable, as they claimed right up to the end.
However, Webvan will never know because they moronically spent all their money in the first (and, as it turns out, only) two years of their existence. It's not like web-based ordering is a natural monopoly, where only the first person to establish themselves will make money. In the long run, whoever can compete best on price and service is who will rule the market. So, there was no reason for Webvan's frenzied growth, because the markets would never be locked off to them.
Now, there's a few supermarkets going about this the right way. They're taking tentative steps toward web based ordering, feeling out the market. Eventually, one of them will hit on the winning combination, and the rest will shortly follow. I, for one, am not sad to see Webvan go.
The only "intuitive" interface is the nipple. After that, it's all learned.
"The question of whether a computer can think is no more interesting than that of whether a submarine can swim" -EWD
For those of us down here in the southeast of the US, there really is no Webvan-like grocery service. Why is that? Probably because PublixDirect will be coming soon, and I doubt anyone wants to compete with them.
And while it may sound like a version of unix, Publix is actually the best brick-and-mortar grocery store around these parts. And they are working on their first warehouse for their "online grocer" business as we speak.
Based on how excellent their grocery stores are, I will be very interested to see how a REAL grocer executes this business model.
http://www.publixdirect.com/
"And like that
Not really forever, but pretty close.
Shaheen was guaranteed $375,000 a year for the rest of his life, and if he dies it transfers to his wife.
Sometimes when I read about things like this, I wonder what the hell happened to America. It used to be if you had a good idea, and the enthusiasm to get the job done, you would succeed.
Now you need to hire-a-name, pay them an insane amount of money to attach themselves to your company (like somekind of frickin' alien creature) so they can bleed it dry.
More and more, it looks like the dot commies were nothing but a shelter for organized crime -- like the insurance companies and savings & loans of days gone by (and today, to some extent).
Sadness for depths to which America has descended! She seems like that young and beautiful runaway girl, confused and fearful, eyeing the pimps and their limosines and wondering whether to cross over into that terrible darkness. Let's hope she regains her strength and spirit and returns to the straight and true path!
Treatment, not tyranny. End the drug war and free our American POWs.
Treatment, not tyranny. End the drug war and free our American POWs.
See my user info for links.
I, too, am a grateful SimonDelivers customer in St. Paul. I'm neither an employee nor a shareholder, though you wouldn't guess it from the way I'm about to start gushing. I will admit that it's in my best interest to help them do well, since I fscking LOVE this service.
A large part of the reason for their waiting list is that they're being careful about rolling out their coverage. A company that offered grocery delivery Way Back When went under largely because they hired a whole bunch of sloppy, lazy drivers who did a lousy job of filling and packing orders. My wife and I did the Dance of Joy (tm) the day they added our ZIP code to their list.
It's true that delivery is not on demand, but that didn't matter for us. The shopping list is in the same spot on the fridge; it's just that the weekly shopping trip is now done in my underwear. I still giggle gleefully when I come home after work to a cooler full of groceries.
Another poster made a point about scheduled delivery services missing out on impulse shopping. That may be true, but I personally prefer to WALK to the corner market for a gallon of milk than to drive out to Grocery Coliseum and wait in the Express (what a fscking joke!) Lane for 20 minutes.
Simon's also done a pretty good job of rolling out his own specials, coupons, and suggestions on the website and the fliers that come with the groceries. In my experience, these are every bit as effective as your normal point-of-sale advertising (and I have the CC receipts to prove it!).
I really believe that for as long as the Bigass Supermarkets continue to employ drooling idiot employees to serve their drooling idiot consumers, I'll be staying as far away as possible.
Please, Simon, I'm begging you: don't screw this up!
We are too soon old, and too late smart.
George Shaheen, the CEO who bailed after 18 months, had a golden parachute in his contract with Webvan to be compensated $375,000/a year for the rest of his life. Now, I don't fault the guy for negotiating a killer deal when he signed on; and I understand that Webvan had to be very generous when shopping around for a CEO who could save their bacon (so to speak). However, this severance package was clearly over-the-top, and far more than the struggling company could afford to pay. They gambled, they lost. And I guess George will have to go find a job now.
Assuming it was a good idea initially, which is a strong assumption, there would be no reason to bring in 'a name' to make it work.
... to get 'a buzz' going.
... that movies can be made better by adding 'a big name' or that a corporation can be more successful by similar tactics ... I think the whole argument for doing it is specious at best.
... a campaign of talking heads and name-droppers ... that's a questionable direction for a society to take.
A lot of company bring in 'big names' in much the way hollywood brings in a big name
The implication in all of this
A good movie with good actors ought to succeed, a good product with good management ought also to succeed.
When it requires some PR 'buzz blitz' to make things succeed
Treatment, not tyranny. End the drug war and free our American POWs.
Treatment, not tyranny. End the drug war and free our American POWs.
See my user info for links.
Well, so much for that - an e-mail went out today that HomeRuns is ceasing all operations today (day before Friday the 13th). Shame - their service ran circles around the competition.