Webvan is the one of California's biggest internet failures. I will explain the history about Webvan simply. Well, the story of WebVan is a cautionary tale for organizations contemplating entry into the online grocery delivery arena. WebVan was an online credit and delivery grocery business that went bankrupt in 2001. The Founder, a man named Louis Borders decided to create a new company that would offer home delivery of groceries, and customers would order food through its website in 1996. He called this company Webvan. 
- Huge initial investments
- Lack of experience in the grocery industry
- Not knowing their target market
The first factor is huge initial investments that WebVan shelled out. WebVan began building huge distribution centers in market after market with out any proof that their way of doing online grocery was going towork. Furthermore, there was a costly investment decision that the company merged with their major rival, HomeGrocer.com. Customers who were familiar with HomeGrocer.com were mostly on the west coast, and were put off by the unfamiliarity of the new WebVan website and orders then dropped 10 - 30%. The result is very bad and make WebVan put a lot of money again in rebranding their campaign.
Secondly, they were lack of experience in the grocery industry. The creators of the company did not have experience in the very competitive industry of grocery stores. This industry has much competition and very low profit margins. It is very difficult for a new company to enter the industry. In addition, they were unable to master inventory management, warehousing, and efficient distribution of goods. And they are too optimistic in their operation planning. With lack of inventory controls and the unrealistic cost structure, there was no way for WebVan to compete with the economies of scale of the major grocery stores such as Wal-Mart, Kroger, and Safeway, etc.
Lastly, they did not know their target market well enough. Because they were optimistic, they did not take into consideration that capturing a market for online grocery shopping would not be that easy. Most of the people were not used to the idea of their groceries being delivered at home and not used to shopping for their groceries online at that time. Webvan believed that a very large number of people would prefer to buy groceries online and have them delivered rather than buying them at a physical location. But they were wrong. People tend to prefer the process of going to a store and picking out their groceries, especially their produce, meat, and deli items. With no charging delievery fee, groceries were sold at a higher price because WebVan did not have the low cost structure. They thought that a website giving shoppers more choice would allow them to charge the same or a premium for shopping online.
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