Over a decade ago, online grocery start-up Webvan closed its doors after going through more than $800 million in venture capital and IPO proceeds in three years.
Four of Amazon’s major executives are actually former Webvan officials and today, after analyzing and fixing the problems, they are launching AmazonFresh. These key players include Doug Herrington, Peter Ham, Mick Mountz and Mark Mastandrea.
AmazonFresh, the online retailer’s newest project, involves the company’s new robotic resource Kiva Systems which was acquired last year for $775 million. Interestingly, Kiva Systems is based on various ideas and technologies originally developed at Webvan.
An early investor in Kiva explained: “When there are a large number of products and the shapes and sizes vary, as they do in grocery, you still need a human at the end to do the picking and packing. The Kiva System is the best solution out there for that combination of warehouse technology and human workers.”
Tom Furphy, a venture capitalist who helped start AmazonFresh, said: “We had a lot of Webvan DNA in the room and we drew on that experience a lot. That was a good formula for building the business responsibly.”
According to company officials, Amazon and its executive learned three major lessons from Webvan and its mistakes:
- Expand Slowly
- Limit Delivery (To High Concentration Areas)
- Focus Relentlessly on Warehouse Efficiency