Why did Webvan fail!?

I'll tell you why...2 primary reasons...

1. The business objective to guarantee a delivery window of 30 minutes seemed to solve a problem consumers didn't really have yet.  Webvan touted this feature of their service as market differentiator but this feature seemed to be more of a detriment.  The case report notes that customers became frustrated by the lack of delivery time slots .  This issue was, at least in part, due to this 30 minute guarntee.  Webvan could have set a less aggressive delivery window and avoided these frustrated customers and perhaps enhanced their total number of customer accounts.  In fact, near the end of the company's life, it did in fact move to a 1 hour delivery window. 

2. Clearly the target metrics for Webvan during inception and at IPO were far too aggressive.  For all of their business locations break even points were never even reached.  Lacking much history of online business ventures, Webvan's management hoped the "inconvenience factor" consumers placed on grocery shopping would lead a high conversion rate of consumers in their target market from offline shoppers to online shoppers.  The company stated a target penetration rate of 1 to 3 percent would allow for profitability.  However the company did not appear to account for the fact that most consumers would not completely convert all of their offline shopping to online.  So instead of getting 100% of the $4600 yearly grocery bill from consumers, Webvan achieved some fraction.  In addition, general customer acquisition failed miserably.  Most of their DCs operated at under 30% capacity during the life of the firm.  Ultimately the financial goals that the company needed to reach to survive were too far beyond feasibility.