Before anyone had shown that people would order groceries online in large numbers, a company called Webvan built a 330,000 square foot automated warehouse in Oakland, California.
It planned to reach 26 cities and placed a $1 billion order with the construction firm Bechtel. When it went public in November 1999, it was valued at more than $4.8 billion (one source puts the peak closer to $7.6 billion). Its total revenue to that point was about $395,000.
Then it kept going. In 2000 it bought a rival, HomeGrocer, for $1.2 billion in stock. That year it lost about $453 million on $178 million in sales. In June 2001 it shut down, and about 2,000 people lost their jobs. It had more than 750,000 active customers at the end.
Tesco, the British supermarket chain, started testing online grocery in 1996, three years before Webvan took its first order. It began with one store. It spent about two years refining the process using its existing stores, and it charged for delivery from the start. By 2000, it had roughly $420 million in online sales.
Tesco got there first, by three years, so being first can’t be what made the difference. And the idea itself held up. Companies like Instacart and DoorDash now deliver groceries to people’s homes. Webvan had the right idea in the wrong order.
I think moving early is overrated. Sometimes you have to, because the evidence points clearly in one direction or your intuition is strong. Even then, being on the field doesn’t mean you have to make the move. Apple wasn’t first with the iPod or the iPhone, and BlackBerry had a smartphone years earlier. Apple got there later and got it right.
More often than not, going small is the better bet. Run a small experiment, watch what happens, and learn before you commit everything. The alternative is going all in and flaming out.
Going small can sound like stalling, but the two are far apart. Stalling is not doing anything at all. You analyse it, and you hold countless discussions about it. A small experiment is active. It’s live testing, which means you get a lot of relevant feedback.