What causes Webvan failure???
When Wedvan was popular, money was spent on infrastructure far exceeded sales growth. For example, Webvan placed a $1 billion (USD) to build a high tech grocery distribution system , purchased 30 Sun Microsystems Enterprise 4500 serves, several Cisco system Model 7513 and 7507 routers and others. Eventually, the company was run out of money.
Other reason that causes the company bankrupt is Webvan does not have basic knowledge of the sector. It is because Webvan made an arrogant assumption that they were a technology business and not a supermarket. Webvan run by the people who did not have working knowledge of the grocery business.
Besides that, Webvan’s failure was a result of poor customer relationship management. Webvan unable earn the trust of its customer. It is due to lack of an initiative by Webvan’s management to learn about customer’s expectation. Furthermore, Webvan was deterioration quality in a product in order to cost cutting. Hence, Webvan losing customer. They did not know about maintain the human touch is more important compare to the competitive in the low margin grocery business.
Webvan re-banded two years into its existence is one of the mistakes that cause Webvan’s failure. Re-banding was done in an effort to change their image from a grocery service to a general delivery service competing companies, for instance FedEx and UPS. The customers identified grocery bag was a logo of Webvan They changed their logo and website appearance in year 2000.Changing their logo and website ,at the same time struggling to raise capital for its daily operations was not a good strategic move.
At last, Webvan was shut down on July 13th 2001.This company has lost over $600 million providing that building a new, national chain of full service or home delivery supermarkets will probably not work.
By Hooi Shang
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