Amazon versus Webvan (Business Essays)

Amazon versus Webvan (Business Essays)Both Amazon and Webvan were well-funded Internet startups in the 1990’s. Both focused on a business model that allowed consumers to order products online that would be delivered to the consumers home. In the article, we discuss why Amazon succeeded while Webvan failed.
The Two Companies’ Background
Amazon:, Inc., Inc. is a Website where customers can find and discover anything they may want to buy online. Jeff Bezos founded Amazon .com in 1990and in July 1995,, Inc. the Fortune 500 Company commenced its operations becoming one of the world most customer-centric company, and selling Worlds Biggest Selection. They offer their customers the lowest possible prices and highest quality. They sell millions of unique, new, used and collectible items in categories such as apparel and accessories, electronics, computers, kitchen and house wares, books, music, DVDs, videos, cameras and photo items, office products, toys, baby items and baby registry, software, computer and video games, cell phones and service, tools and hardware, travel services, magazine subscriptions and outdoor living items. The Company organized its operations into four principal segments. 1. North America Books, Music and DVD/Video (BMVD); 2. North America Electronics, Tools and Kitchen (ETK); 3. International, 4. Services
Webvan: Webvan was started in 1996 by Louis Borders and was established to sell groceries over the World Wide Web. George Shaheen resigned as CEO of Anderson Consulting to take advantage of the opportunity to become CEO of Webvan. Webvan, which originated as an online grocery service, delivers food (including its BestYet label, a co-brand with food distributor Fleming Companies) and non-prescription drugs to their customers’ doors. Webvan’s vision was to provide grocery-shopping solutions that would save consumers both time and effort, without sacrificing the quality, selection, and low prices of traditional brick-and-mortar stores.
Why Amazon Succeeded
Amazon’s success was not just because of good luck. In short, there are several reasons that made this web site successful. First, it has a very clearly defined purpose: to provide quality online customer service. It automates tasks normally handled by a human customer service representative. Lastly, they have spent money on marketing their web site so the public knows who they are and how to find them online easily. This web site is a prime example of successful, intelligent web sites that utilize database information to create dynamic web content. Making an interactive web site will keep people coming back to your web site again and again so you can give them new advertising information and offer new products and services.
Another reason customers like buying from and its associates because they provide a unique and quality service as well as security in credit card transactions. undertakes that every transaction made “will be 100% safe”. According to, customers pay nothing if unauthorized charges are made to credit cards. In the US, the Fair Credit Billing Act, a bank cannot hold a cardholder liable for more than $50 of fraudulent charges. Customers are given the option to phone or fax in their full credit card numbers. In the UK,, covers liability up to ?0.
An important ethical crisis that an e-Business faces deals with how they handle their customers?data. It involves questions about what information they should collect (in addition to what is required to complete a transaction), how much of it they store, where they store them, how they secure the data etc. Another thing that most e-Businesses do is sell their customer lists to other vendors who sell related products. Many customers would be rightfully concerned about who their information is being sold to. Data like their contact information, purchasing habits etc. could be used in a damaging way (identity theft is a major concern) by unscrupulous people. So e-Businesses have to be really careful in protecting their customers?data and who they sell this information to.
E-Businesses like spell out their security and privacy policies in detail on their web sites.’s privacy statement details what information it collects from users when placing an order or signing onto a specific service. Customers can choose not to provide certain information, but then they might not be able to take advantage of many of features. They use the information that customers provide for such purposes as responding to customer requests, customizing future shopping, improving their stores, and communicating with the customers.
Why Webvan Failed
Also, Webvan’s failure was not just contributed to the bad luck. It’s possible that Webvan’s failure was probably pre-ordained from the day it was formed. It had at least three systemic flaws:
High critical mass threshold.
Webvan’s high-tech order-picking centers were so expensive that the company was upside-down financially from the day the first one was built. The centers might have performed efficiently at scale, but the company did not survive long enough to prove it.
Low “route density.”
In the Bay Area, at least, Webvan had a hard time managing the number of miles traveled per delivery. Long bridges, congested roads, and a widely spread customer base meant delivery costs never came close to their theoretical efficiencies. Covering the entire local media market (i.e. the “Bay Area”) meant some vans would have to travel an hour or more from the D.C. before returning empty.
Poor understanding of consumer needs and behavior.
Penetration projections assumed that customers would be won over by their initial Webvan experience and that they would thereafter purchase most of their grocery needs online. In fact, consumers warmed slowly to the service, and many used them only for occasional stock-up shopping. Users were enthusiastic, but they didn’t stop using conventional supermarkets too.
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