GD 438 – E-Commerce & Marketing : Week 1 – Case Study

Company: Webvan, online grocer
Webvan, one of the first online grocers, has been coined by Cnet.com as being the number one biggest flop of the dot com bust. (CBS Interactive) With a bit of researching into the company’s business model, it’s easy to see why. That’s not to say that their idea was not a good one, it was! However, it’s not about what you do, it’s about how you do it.
In business, you have to do a lot of planning and be wise and cautious in your decisions. Financial planning in this manner is essential. A company’s revenue must, a least, meet the capital investments put forth to start the business. Webvan spent enormous sums of money to build high-tech distribution centers in order to meet expected customer demand. They also spent even more money on marketing and advertising to attract customers and increase sales. In an article on Venture Navigator entitled, “Webvan’s unsustainable business model”, it is reported that, “it was costing Webvan about $210 to acquire each customer.” Considering that the average order was only $81 and the business plan had been estimated at $103, it is clear to see why the company could not make ends meet. (Mullins) In the two years Webvan was in operation the company spent almost $1.2 billion dollars and still flopped. This goes to show that no matter how good an idea is or how much money you have, solid planning is still crucial for success.

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