Webvan Done Gone

  |  May 1, 2001   |  Comments

Webvan didn't have to fail, given the big market for food delivery, one that the Internet makes easier than ever to reach. Dana suggests that Webvan should've done some homework.

Last week's announcement from Webvan that it was retreating from the Atlanta market saddened a lot of people here, especially my two kids.

They were always calling on me to call on Webvan, and I did a few times. The service was good and the groceries excellent. Several of my neighbors came to depend on the service. When we saw one of its trucks, we even sang the little jingle we'd made up.

So what went wrong?

Many analysts think the whole idea was crazy. People don't want groceries delivered, they said. It's a superpremium service, they said.

But despite Webvan's demise, food delivery is alive and well in my neighborhood. It's conducted from huge 18-wheel silver trucks marked "Sysco."

Not the same, you say. That's a restaurant-supply house, you say. Well, yes, it is. But Sysco, which is based in Houston, has been making a handsome profit delivering food for decades. It delivers quality products, it delivers them on schedule, and it also delivers a ton of important information on its Web site.

But when Sysco started, critics said that it had no hope, just like Webvan. Restaurateurs need to go directly to the markets to ensure they find the freshest ingredients, it was said. No one will pay Sysco's prices for a mass-merchandised solution, it was also said. Well, these days, Sysco is laughing all the way to the bank.

What exactly did Sysco do right? Here are a few things:

  • Sysco knew its market and the needs of that market.

  • Sysco delivered its customers valuable information -- not just merchandise, but information that helped its customers make money.

  • Sysco didn't just sell the same stuff you could get at Publix or Costco. It put out premium merchandise under its own brand, becoming vertically integrated rather than relying on retail profit margins.

  • Sysco used all sales channels.

  • Sysco grew organically, never investing ahead of itself.

What should Webvan have done differently?

  • Webvan should have sold itself as a premium choice from the beginning, selling only the finest products to a discriminating clientele.

  • Webvan should have stayed in one market and made that profitable (adding liquor sales and pushing for cigarette sales as well) before moving into 10 markets where it didn't know the legal climate.

  • Webvan should have sold memberships and guaranteed members premium delivery times, thus generating regular cash flow and an incentive to order regularly.

  • Webvan should have taken orders via telephone, even if the operators were, in turn, just filling out forms on the Web site.

  • Webvan should have offered menus, not just food. A complete week's menu, based on its own knowledge of the wholesale market, delivered with cooking directions, would have saved customers more time and made more of them dependent on the company.

Webvan didn't have to fail. There is a market for food delivery, a big market, and one that the Internet makes easier than ever to reach. But you have to do your homework. You have to take it one step at a time. And you can't let "irrational exuberance" turn you into a fool.

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ABOUT THE AUTHOR

Dana Blankenhorn

Dana Blankenhorn has been a business reporter for more than 20 years. He has written parts of five books and currently contributes to Advertising Age, Business Marketing, NetMarketing, the Chicago Tribune, Boardwatch, CLEC Magazine, and other publications. His own newsletter, A-Clue.Com, is published weekly.

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