The Last Mile Revisited

Don't feel bad if you fail to grok the $800 million failure of Webvan, the once highly touted grocery delivery service. Was it the food? The service? High prices? Bad CRM software? Or was it just a lousy business model? I say it was none of the above.

In the next few days, you'll hear many pundits scramble to put Webvan's collapse into perspective. CNBC will call it another dot-bomb. The Journal will say it's yet another sign of a dot-coma. BusinessWeek will zero in on the domineering influence of venture capitalists. Nice try, but way off base. The truth is much simpler: It's all my wife's fault.

We tried Webvan once. She didn't like something about it--was it salty crab cakes?--and now, poof, Webvan's out of business. And I'm feeling a bit guilty about the whole episode. How many years will it be before another VC is gutsy enough to fund something similar? Will United Parcel Service ever try picking up and delivering bagged groceries?

Sure, I'd written a column speculating that Webvan might be the greatest thing since flying scooters. And, no--I can guess what you're thinking--I've never owned a share of Webvan. I had my dot-com-uppance last year, in a debacle that has probably added several years to my work life--hold the applause. So now that Webvan is in a deep freeze and my record as a prognosticator and Seer of All Tech Things is permanently sullied, why do I still believe Webvan was a good concept?

Maybe it was the allure of next-day deliveries for Web-ordered goods. Maybe it was the amazing chutzpah of Webvan's vision: building an elaborate supply chain and high-tech regional distribution centers to organize this unprecedented delivery service. But mostly, Webvan was a convenience. There was a world of commerce before 7-Eleven stores became ubiquitous; I just don't want to return to it.

So, are we better off even though Webvan, Pets.com, and Kozmo.com are no longer bringing us groceries or dog bones or videos? Here's why we're not. Even though I was never a regular user of these services, I cheered them on, believing they might force traditional grocers to innovate a little bit. Safeway was reportedly testing a Web service that would maintain a customer shopping list. Company workers would pack these items in advance, and customers could pick them up at a Safeway store. Not a bad idea for busy parents, but what's Safeway's incentive to innovate now? Nil. Albertson's is testing a service similar to Webvan's in the Seattle area, but it's only a test.

Grocery stores want you to come into the store to buy goods, because the visual stimulus greatly increases your chances of making impulse purchases. I'm among the easiest marks--I always pick up something unexpected at a store. So why not online, too? Even a CRM system written in Assembly language could see me coming in a matter of seconds. "Mr. Weston, there's a blue-light special on blue corn chips!" Would that have saved Webvan? Probably not.

These CRM systems generally don't work that well. CDNow, for instance, still doesn't know me from Adam Ant, even though I've bought at least a dozen CDs from the company in the past several years. They keep sending me E-mails nudging me to check out Madonna or Metallica. Sorry, guys, I like artists such as Radiohead and Neil Finn. (Hint: It's a different genre of rock.) Yet, somehow, CDNow survives. And Peapod carries on (so to speak) as a grocery delivery service (although it never had Webvan's ambitions or style).

What are the larger lessons, if any, of Webvan's demise? Choose one:

In an exclusive interview with the customer most responsible for Webvan's unplugging, I gained an insight that even the best business-intelligence software might never have sorted out. It turns out that some people would prefer to get out of the house and go shop, especially on a Saturday morning.

Rusty Weston is editor of InformationWeek.com and InformationWeek Research. He lives in the San Francisco Bay area. What are your thoughts about the meaning of Webvan's demise? Join the Listening Post discussion.