An example of an E-commerce failure and its causes

The example of an E-Commerce failure that we choose is the webvan.com.

Webvan was an online grocery retailer. In the quest to become the number one online grocer, Webvan managed their way through a tangled web of operational changes. Webvan is an interesting failure, it was started in 1999 by Louis Borders, founding partner of Borders Books. The company spent an extraordinary amount of money during its short tenure as the largest and most promising pure play e-grocer.

On 9 July 2001, Webvan announced it would cease operations and seek temporary protection from creditors under Chapter 11 of the U.S. bankruptcy code. About 2,000 employees lost their jobs. In money invested and employees affected, Webvan is the largest dot-com startup to fail.

Webvan grew too quickly, even for a New Economy company, and eventually choked on its own complexity. It focused on the delivery side of the dot-com shopping explosion but, like others, found sluggish consumer spending and the slowing economy impossible hurdles. Webvan failed because:

Ø It could not break the physical strength of traditional players in the grocery market, such as Safeway and Wal-Mart.

Ø It could not offer a strong value proposition to dot-com retailers and grocery consumers.

Ø It could not make a profit as a niche operation.

Stewart Alsop chimes in with his opinion on why Webvan failed. The company wasn't run by entrepreneurs, but by consultants. Entrepreneurs understand the very basic concept that any money you spend should advance the business. Consultants just spend money.

Webvan failed, but others have succeeded, and still others are still trying to

make a go of it. There are no guarantees of success. Nonetheless:

• Have a strong preexisting brand.

• Have good customer service.

• Have a preexisting distribution network.

• Operate on a dense geographic market.

• Have low costs.

Not all of these are necessary, but they help. Webvan managed one of

these - their customer service was good.