Online grocer Webvan files for bankruptcy, will end service after losing $830 million
SAN FRANCISCO (AP) – Webvan, which sought to revolutionize grocery shopping by taking orders online and delivering to customers’ homes, shut down Monday after burning through $830 million without making a profit.
The company, one of the Internet’s highest-profile businesses, said it will file for Chapter 11 bankruptcy and lay off 2,000 employees
Webvan joins other online grocery services on the dot-com scrap heap, including ShopLink.com and Streamline.com, two New England services that closed last year. GroceryWorks.com, backed by supermarket giant Safeway, temporarily closed last month. Peapod, Webvan’s biggest rival, nearly failed last year before receiving a cash infusion from a Dutch grocer.
”We do believe we had a brilliant concept,” Webvan spokesman Bud Grebey said. ”We were just ahead of our time.”
Webvan was forced by competition to sell items at nearly the same price as many supermarkets. But it also had to absorb an estimated $10 to $15 for each delivery, making it virtually impossible to make money.
According to a recent survey by the research firm Jupiter Media Metrix, less than 1 percent of the U.S. population had ordered groceries online in the past year.
Webvan maintained it had 750,000 active customers in seven markets – San Francisco, Los Angeles, Orange County, Calif., San Diego, Seattle, Chicago and Portland, Ore. The company had already pulled out of Atlanta, Sacramento and the Dallas area.
The company’s market value has plunged by $7.2 billion since the 1999 initial public offering at $15 per share. The stock’s last trading price Monday was 6 cents per share.
Analysts said they doubt online grocery delivery will work unless it is offered by established supermarket chains catering to busy, high-income households.
”It won’t be a way to make more money for the traditional supermarkets, but it might be a way for them to retain their most desirable customers by offering them another sales option,” said Miles Cook, a vice president at the consulting firm Bain & Co.
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