Perhaps the biggest flop in the dot.com era was an online grocer called WebVan. The company burned through $800 million in cash before filing for bankruptcy in 2001 (yes, I realize some of you werent alive yet haha). Part of WebVans downfall was a cost structure heavily skewed towards fixed costs. For example, WebVan stored huge amounts of inventory in refrigerated warehouses that cost $40 million each to build. The company had 4,500 salaried employees with benefits, and a fleet of its own delivery trucks. Fast forward to more recent times, and we now have Instacart trying to become a profitable online grocer. Instacart is avoiding the huge fixed costs that plagued WebVan in a number of ways Instead of hiring salaried employees with benefits, Instacart uses drivers who are independent contractors to pick up groceries directly from the store and deliver them to customers. Since the drivers use their own vehicles, it eliminates the need for a fleet of delivery trucks. The transport from store to customer eliminates the need for refrigerated warehouses and inventory.

(source: Wall Street Journal, 1/13/2015)

What are your thoughts about this from an accounting standpoint?

What are your thoughts about this as a consumer?

Do you use this service? Are you willing to pay more for the convenience of not having to shop yourself?