An example of an E-Commerce failure and its causes

Success of some companies in doing e-commerce might lighten up your interest, just like many companies do.

In fact, making money online may be harder than earning from business offline, many companies failed in e-commerce make us realize that selling on the Internet is not as easy as it was portrayed to be.

Webvan(1999-2001)
Webvan is one of the failure examples and was hailed as Number One in the "Top10 dot-com flop" by CNET in June 2008 .

May be you can get some ideas about what was the company doing? Web and Van...? You're right, it actually did online grocery business and operated in term of online "credit and delivery", with the promise of delivering products to customers' home within a 30-minutes window of their choosing.

Webvan was founded by Louis Borders in the late 1990s, which was the period of dot-com boom and set the headquater in Foster City, California, USA. Other investors included Goldman Sachs and Yahoo, who encouraged it to rapidly build its own infrastructure. At Webvan's peak, it offered service in 10 cities in USA. The company had hoped to expand to 26 cities, however, it eventually went for bankruptcy in July 2007.

Why Bankruptcy??
Webvan's spokesman, Bud Grebey, said that the shut down of Webvan.com is caused by the change of delivery fees, bad press over former CEO, George Shaheen, and the critical auditor's report.

However, there are some main causes that led to bankruptcy, firstly, it is believed that Webvan overspent on infrastructure, it far exceeded sales growth!

Secondly,Webvan failed in realizing the promise as delivery within 30 minutes. The delivery was late sometimes affected the customer satisfaction.

Thirdly, the problem came from management level, because there was no any senior executive had any management experience in the supermaket industry, including its CEO!

Lastly,Webvan had grown too fast, it expanded to 26 cities within a 2-3 years time. It had not attracted enough customers to justify its spending.

In conclusion, E-Commerce may help company in doing business with more creative and easier ways.However, there always might be some portion of companies can get success in the E-Commerce, it must associate with appropriate strategies and planning.
Knows the causes of failure, prevents it from ruining the business!

Useful Links:

1) Why Webvan Droff Off a Cliff

2) Top10 dot-com flop

3) Success and Failure of Pure-Play Organizations: Webvan vs Peapod