End of the Road for Webvan

Jul 09 2001

PALO ALTO, CALIF. - The online grocer Webvan Group is due to make an announcement on Monday morning, reportedly to say it is closing down after a long struggle to stay in business.

A spokesman for Webvan said late on Sunday the company will issue a statement on Monday morning and make a related announcement to all of its 4,500 employees. He would not confirm or deny reports on local news programs in San Francisco that the company is shutting down.

However, Webvan has made no secret in recent months that it was in a fight for its survival, and that its ability to stay in business was more in doubt the longer investors stayed away from dot-com companies.

Webvan's stock closed on Friday at six cents a share and the company has spent most of the past year scaling back its ambitious plans to become a nationwide service. Recently it has exited several key markets and even appealed to its customers to place larger orders.

In other signs that Webvan could be getting ready to call it quits, the Webvan Web site was inaccessible late on Sunday and calls to the customer service center were not answered.

Callers who tried to reach Webvan through its 800 number were greeted with the message, "Our customer service center is currently closed."

Although the company has built a loyal base of customers, it never revolutionized grocery shopping the way it had predicted. While some people took to the concept of placing an order over the Internet and waiting at home to have it delivered, many others found it quicker to just drive to the store.

Webvan also encountered tough competition from some local grocers that set up their own home delivery services, and it found that its operating costs were much higher than it had planned.

Still, the company has not given up easily. It recently won approval for a highly unusual reverse 1-for-25 stock split, designed to boost its share price to above $1 so that it could continue to trade on NASDAQ and gain more visibility among big institutional investors.

Although Webvan would be just one of hundreds of dot-com companies to go out of business, its story is somewhat unique. Webvan was one of the most well funded of all the dot-com companies, having raised, and burned through, around $1 billion in financing.