Online grocery fails to bear fruit

One-time dotcom high-flyer Webvan, which raised more than $800m to fund its online supermarket operations, has shut down, fired 2000 workers and said it will file for Chapter 11 bankruptcy protection.

The internet grocer, which planned to open 26 distribution centres in the US, has terminated the service to 750,000 active customers in Chicago and its six Pacific coast markets.

A note posted at the company's website reads: "If you have a scheduled delivery, you will not be receiving it and you will not be charged. To all our loyal customers, we are grateful for your support and encouragement. It has been our pleasure serving you."

The company's plans initially attracted the backing of several top Silicon Valley venture capitalists such as Benchmark Capital, Sequoia Capital and Softbank. Yahoo and E*Trade Group also invested in Webvan.

Webvan, which raised the $800m from venture capitalists and Wall Street since its launch in 1999, had losses of $830m. The company listed liabilities totalling $96.5m as of 31 March in its most recent filing with the Securities and Exchange Commission, which also said the company dealt with 75 distributors and 500 vendors.

The list of unsecured credits will include the company's former chief executive George Shaheen, who resigned in April and had previously held the same position at Andersen Consulting. Shaheen had a clause in his contract that required Webvan to pay him $31,250 per month for the rest of his life.

The company tried to deliver orders of meat, fish, prepared food and other items in a 30-minute window set by online customers. The business depended on building distribution centres in large metropolitan areas that were capable of processing the volume of 18 supermarkets with lower labour and property costs than stores.

But some analysts regarded the service as among the riskiest of internet ventures. Tim Miller, president of Webmergers.com, said that Webvan was one of the best-capitalised of the dotcom shutdowns, which may be why it held out to the end of the purge.

"I think the market has pretty much discounted Webvan as a viable player. Rumours of its impending demise have been circulating for weeks," he said.

Webvan's stock price peaked at $34 shortly after its IPO, but has been stuck below $1 all this year. The stock's last trading price was pitiful six cents. The company will not proceed with plans for a 25-to-1 reverse stock split.

Chief executive Robert Swan said in a statement: "The clock has run out on us."