Webvan: Who's To Blame?

W hile there are many fabulous things about the society in which we live, one of the rotten ones is our litigiousness. We hear about some of these lawsuits and figure it's just not humanly possible for a sane person to conjure up some of these schemes, only to be stunned in even greater measure when we hear that juries of our peers have found in favor of the lunatic plaintiff and her or his licensed ambulance chaser. But I think we're on the verge of having our ability to suspend belief pushed to its absolute limit by a court case that has not yet unfolded but will surely explode onto the scene any day now.

The case-to-be involves Webvan, whose market cap on the day of its initial public offering 20 months ago reached $11 billion (yes, with a B) and which last week filed for bankruptcy protection and fired 2,000 workers. This is the company whose business plan basically said that the problem with razor-thin margins in the grocery-selling business is that customers simply haven't been paying enough for groceries to yield higher margins for grocery sellers, so those moron customers need to be straightened out by us charging more, pushing for larger orders, and tacking on a delivery fee to boot. This is the company whose high-profile former CEO lasted 19 months, during which time Webvan's stock price went from an IPO-day high of $34 to less than $1, but who nevertheless was given a retirement benefit of $375,000. Per year. For life!

This is the company whose current CEO said last week's shutdown was caused not by a flawed idea but by an unresponsive environment: "Webvan has weathered numerous challenges [he did not say how many of those challenges were totally self-imposed, but let's just say the number falls somewhere between all and all minus one], and in a different climate I believe that our business model would prove successful."

And this is a company of whom a spokeswoman said last week, "In hindsight, I do think we'll have been viewed as one of the trailblazers." I guess she means it's like how we'll always view as an architectural and engineering "trailblazer" the Tacoma Narrows Bridge, which incorporated some unheard-of designs and technologies and, after only a few months in operation, twisted and undulated in the high winds and came crashing spectacularly to the ground.

So about that lawsuit: It would seem from some of the stuff above that there's a whole lotta blame to go around within that company and particularly among its executives, board of directors, venture capitalists, and hype-crazy stock analysts. But I suspect the ambulance chasers will only toss those parties onto the defendant list as afterthoughts, because, of course, the real blame--the real blame--lies with those fickle, flaky, 'fraidy-cat customers who just wouldn't buy enough stuff through a channel they didn't believe in.

When the company realized it was spending too much money (well, what choice did it have but to spend a lot of money? If only the misguided and miserly customers had just spent more, then by contrast it wouldn't have seemed like Webvan was spending so much, right?) it closed down operations in some major markets around the country, including Atlanta and Dallas. A Webvan spokesman said those closings in major metropolitan markets created "negative news and anxiety among customers about our long-term viability," and that customers were then failing to give Webvan repeat or increased business because (silly customers!) they thought Webvan was going under.

As a result, the spokesman said--and here comes the knife to the heart, the closing argument--"our revenues for the quarter would come in lower than expected." And, flush! There, by sheer customer inaction and uncaringness, went a company that spent $830 million and never made a nickel--and never was a victim so sorely used.

So all you people who spent, say, $10,000 or more with Webvan, I think you're safe. As for the rest of us, though, be on the lookout for the process server: We did it, and we're responsible.

BOB EVANS
Editor-in-Chief
[email protected]

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