What caused the infrastructure costs of Webvan to become unsustainable around 2001?
Answer
The expected volume of online shoppers did not materialize rapidly enough.
Webvan implemented an asset-heavy model requiring massive upfront investment in highly automated warehouses and proprietary delivery fleets. This strategy was predicated on rapid, large-scale consumer adoption. When the anticipated volume of online shoppers failed to grow quickly enough to absorb these enormous fixed infrastructure costs, the business model proved fragile, leading directly to the company's bankruptcy around 2001. The fundamental issue was the mismatch between high fixed costs and insufficient revenue generation from modest customer numbers.
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