WebHouse of Cards?

There are people who think that the failure of WebHouse says more about the company itself, and how it spent cash, than the online market for discounts on groceries and gasoline.

Those people are wrong. Yes, WebHouse attracted its share of discount-seekers during its brief run. And maybe, as the company suggested when it announced its demise, small-scale success could have been multiplied with just an extra truckload or two of cash — money the company had no chance of attracting in today’s environment.

But that’s wishful thinking. Instead, the WebHouse obituary should be added to the ceiling-high stack of evidence showing that the Internet is not yet a place where people will turn for groceries or gasoline or discounts on such things. This is one area where the old way works pretty well for consumers and where e-commerce energy, time and money is being wasted in a vain attempt to lure away perfectly content customers.

Coupon Clippers Unite

In one very narrow view, there are two types of people in the world: those who clip coupons to save on groceries and other purchases, and those who think it’s a waste of time. WebHouse never had any chance of turning people in the second category into customers, and to its credit, didn’t seem to try too hard to do so.

But there are millions of people in the first category. Why else would wads of glossy coupons slide out of your newspaper when you pick it up every Sunday morning? It’s a massive offline industry and one that WebHouse thought would translate naturally to the Web.

Easier said then done. Much easier. Those coupon clippers have a system already, albeit a primitive one involving paper and scissors and lists and the like. WebHouse certainly didn’t make it easier for people to change. Its system was byzantine and involved at least a half-dozen steps, not to mention guessing what discount would be accepted and being willing to roll the dice on brand names.

But that doesn’t explain the entire problem. No, it goes much deeper, straight to the heart of one of the earliest e-commerce sectors, one where hopes were high and cash-burn rates even higher.

Deeper Problems

WebHouse was trying to put a spin on the business model that so many investors thought couldn’t miss: home delivery of groceries. That “can’t-miss” industry is now populated by public companies whose stock trades for a couple bucks a share and private companies that are so specialized that their successful business models can’t be translated large-scale.

Maybe it’s time to put two and two together — the two we got from the Peapod debacle and the two that WebHouse provided — and realize that people just aren’t ready to abandon their old shopping habits. Maybe not now, and maybe not ever.

The Old Way or the Highway

Look around you, and chances are you’ll find a grocery store being built, regardless of how close the nearest competitor or even another outlet in the same supermarket chain is. Does that look like the actions of an industry worried about how its customers will get their groceries in five years?

Hardly. Why? Because supermarkets know their customers and how to keep them. The supermarket industry in the United States alone spends $5 billion (US$) each year on loyalty programs, giving in-store discounts to customers who sign up for store cards and similar efforts.

Largest Market

It’s understandable, of course, why so much money and effort has been aimed at online grocers. Everyone eats, after all, and shopping is seen by nearly everyone as a necessary if evil chore.

But maybe it’s time to pull the plug on that once promising notion that people will give up their brick-and-mortar stores in favor of deliveries and discounts. It’s not just a matter of time anymore. Each day that customers remain reluctant, dot-coms spend millions of dollars to wear down their resolve.

Maybe it’s time to admit that they can’t be sold something they don’t want, no matter how much sense it makes.

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