Struggling online grocer Webvan Group Inc. has ceased operations and terminated its 2,000 employees.
The company, which serviced 750,000 active customers, also plans to file for Chapter 11 bankruptcy protection and sell off its business and assets.
Robert Swan, Webvan’s CEO, said the company’s cost-cutting actions to stay afloat, weren’t enough in today’s economic environment that has seen venture capital dry up. The company also saw its second-quarter order volume drop.
“Webvan has weathered numerous challenges, and in a different climate I believe that our business model would prove successful,” Swan said in a statement. “At the end of the day, however, the clock has run out on us.
Webvan launched in 1999 promising to revolutionize the supermarket industry by taking orders online and delivering groceries to customers’ homes. The firm had raised about $800 million from venture capitalists and Wall Street. But the company never came close to making money, losing $830 million since its inception, according to news reports. The company has pulled out of three markets – Atlanta, Sacramento and the Dallas area – in an effort to conserve its dwindling cash reserves.
Each of the company’s hourly workers is expected to be paid their earned wages, accrued vacation plus a $900 gift from an anonymous donor. Salaried workers will receive their bonuses for the first half of the year, as well as earned wages and accrued vacation, the reports said.
Webvan listed liabilities totaling $96.5 million as of March 31 in its most recent quarterly filing with the Securities and Exchange Commission. Webvan dealt with 75 distributors and 500 vendors.
The company’s list of unsecured creditors will include Webvan’s former CEO George Shaheen, who resigned in April, triggering a clause in his contract that required the company to pay him $31,250 per month for the rest of his life.
The Foster City, CA-based Internet retailer served markets in Chicago, Los Angeles, Seattle, San Diego, San Francisco Bay, Portland, Oregon, and California’s Orange County.
Webvan debuted as a publicly traded company in November 1999 reaching a high of $34 a share. Friday it closed at 6 cents.
The company shut down its Web site and began closing distribution centers on Sunday. The largest centers, spanning roughly 350,000 square feet, are in Carol Stream, IL., Suwanee, Ga. and Oakland, CA.
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