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WEBVAN CHECKS OUT



Published: Thu, July 19, 2001 @ 12:00 a.m.



San Francisco Chronicle: It was a gem of an idea but a dud in reality. With a few mouse clicks, a customer could avoid parking hassles and the checkout line by ordering groceries from the Webvan delivery service.

But after spending $830 million on warehouses, delivery vans and salaries for 2,000 workers, the company closed down last week. It was the biggest dot-com bust to date.

It hardly means that e-commerce is over. People still buy plane tickets, clothing and books on the Internet. By now, it's clear that the potential of the Internet is not boundless. Market share and profit can now be mentioned alongside tech innovation and paradigm shift.

Webvan took on a major challenge. It entered a supermarket industry where profit margins hover at 1 percent. Its dream customer -- who worked long hours and didn't need to squeeze the peaches -- never logged on in big numbers. Webvan also had the bad luck of tin-cupping for more venture capital money this year as lenders grew stingy.

Overboard rhetoric: The company has become the poster-child for the hype and overboard rhetoric that tech salesmanship brought on itself. Customized software, automated packing sheds and fast expansion are one thing. But a small market and ingrained customer habits are a bigger reality. In the Bay Area, it needed 8,000 orders per day to break even, but never had more than 3,000.

Bringing the potential of the net to more realistic levels can now begin, if it hasn't already. Etoys, Petopia and Kozmo all failed to change their worlds. The brick-and-mortar standbys that sold toys, pet food and videos survived the attacks.

In Webvan's case, something different may emerge. The supermarket industry, which watched its upstart rival warily, may step in cautiously with scaled-down successors. Stay-at-home customers may get a box of groceries though it might not come in Webvan-style van and uniformed driver. Most people, after all, are likely to shop in person, as they have for centuries.




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