Webvan files for bankruptcy

Webvan's business model has not worked

The US online grocer Webvan Group has filed for bankruptcy protection.

The company, which has lost $700m since its launch, will cease its operations and lay off 2,000 of its employees.

We are walking off the field exhausted and a bit bloodied, but holding our heads high

Webvan

Over the last few months Webvan has been fighting to survive, after its cash reserves ran low and its operating costs proved higher than expected.

"We are walking off the field exhausted and a bit bloodied, but holding our heads high," Webvan spokesman Bud Grebey said on Monday.

Out of service

The company will file for protection from its creditors under Chapter 11 bankruptcy in the US.

The move means that it will end its grocery delivery service to 750,000 active customers in seven markets in Chicago and on the West Coast.

Its website was inaccessible on Monday.

Launched in 1999, Webvan soon became a high profile internet company and promised to revolutionise the supermarket industry.

Webvan raised about $800m from investors, but has not managed to make any money.

It has also blamed declining orders in the second quarter.

Winding down

"Webvan has weathered numerous challenges, and in a different climate I believe that our business model would prove successful," said chief executive officer Robert Swan.

"At the end of the day, however, the clock has run out on us."

The company operated by taking grocery orders online and delivering to customers' homes.

Webvan says it has no plans to resume operations and will wind down its business.

It hopes to sell its assets and expects its stock to be delisted from the Nasdaq stock market.

The company's seven markets include Chicago, San Francisco, Los Angeles, Orange County in California, San Diego, Seattle and Portland in Oregon.

Tesco in the US

By contrast in the UK, the country's biggest grocer Tesco has managed to set up a successful online service.

Last month the company announced plans to start online retailing across the Atlantic through the US supermarket chain Safeway.

Tesco sells everything from cheese and vegetables to travel insurance online.

It has almost one million registered customers, annualised sales of about £300m and is profitable.