Webvan Case Solution

The management was overly ambitious about the growth of online grocery shopping, and so the projections that the company announced were impossible to be realized. Amazon can avoid this same mistake by realizing the price sensitivity of the target market.

Another lesson that Amazon can learn is that a company should be careful about spending too much and expanding rapidly. In an attempt to grow big very quickly, Webvan adopted a capital-intensive business plan even when they were losing money. There were problems with the supply chain infrastructure as well which the company built from scratch. The supply chain model adopted by the company was complex and was vulnerable to bottlenecks. The company spent $15 million to automate several aspects of its business process while keeping the prices low. Webvan’s cost of supplying the goods was much higher than traditional the supermarkets, and the company was delivering to areas with a low concentration of potential customers.

Amazon is attempting to revive Webvan in the form of AmazonFresh. The greatest problem that they face is that of faster shipping of goods in a cost-effective manner. The company is trying to beat off the competition by making use of robots in assembling customer orders; however, the challenge remains. Dominating the number of deliveries made in a day is the greatest problem that the company faces today and to fix this problem, the company will have to focus on faster shipping.