The failure of Webvan was largely due to the absence of an articulate, functioning business model and management’s inability to successfully change the model and redefine the business as deemed necessary. From inception, the company’s rationale of creating, delivering, and capturing value was incomplete, lacked focus, and was insufficiently researched. Webvan’s plan to primarily establish a large, critical mass by offering groceries online in hopes of eventual expansion into other categories on a global level as well as its mission “to deliver the last mile of e-commerce,” lacked the acknowledgment and action of vital steps necessary to achieve these goals in a new and evolving market.
The company immediately focused its attention on developing a web store, constructing distribution centers and creating information systems, continually ignoring the need to implement a marketing strategy to successfully attract profitable customers to an unfamiliar market as well as create awareness to promote the business. In addition, Webvan never defined profitable target customer segments and overlooked the urgency to determine consumer demand and the ability to meet customer needs. Webvan had the opportunity to be a highly successful organization, but the lack of pertinent research used to define its value proposition, target market, and most profitable revenue streams while repeatedly implementing ineffective cost-saving initiatives and compounding operations forced the company to abruptly close its doors.
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