Value America
Encyclopedia
Value America or VA was a dot-com company
founded in Nevada
in 1996 by Craig Winn
and Rex Scatena, and relocated to Charlottesville
, Virginia
in February 1998. Its business model
involved connecting customers on the Web directly to manufacturers, with the intent of providing better pricing and faster shipping (a just-in-time model similar to those used by Wal-Mart
and Dell
). Customers could order a wide range of products from VA's website, then VA would transmit the orders directly to the manufacturers, and the manufacturers would then package the products and ship them directly to the customer. Winn referred to this concept as "convergence commerce". Value America was backed by Microsoft
co-founder Paul Allen
's Vulcan Ventures
and FedEx
co-founder Frederick W. Smith
.
in April 1999 was a success: on the first day the stock closed at $55 a share, valuing the three-year-old profitless company at $2.4 Billion.
involved was still new and not well tested among the large consumer products companies VA represented, and since VA had no warehouses, traditional supply lines couldn't be used. Shipments would be delayed, go missing, and arrive badly packed or with the wrong product inside. Billing was also a problem, and charge backs were difficult to perform due to the mishandling of shipped goods. VA was also harmed by problems with rebates on computers requiring the acceptance of long-term Internet access
contracts, a problem that also affected several mainstream retailers and which attracted the attention of the Federal Trade Commission
. Also, many of the products Value America was trying to sell were easily available in many other places, making it difficult for them to compete by methods other than low prices. Towards the end of 1999, VA decided to lower its aims, drastically reducing its product catalog and focusing on information technology
products and office supplies, items that were sourced from traditional distributors. As the company floundered, Winn and executives enjoyed the 'dot-com lifestyle', spending large amounts of money on expensive perquisites such as private jets, as well as plans for a large campus that were never executed.
By 2000, Value America was failing due to the negative effect that the communication problems had on their customer service. The stock had fallen to 72 cents and Value America filed to reorganize under Chapter 11
of the Bankruptcy Code on August 11, 2000. The remains of the company (in particular the custom supply chain management
system they had commissioned) were sold to IT product distributor Merisel in October 2000.
Dot-com company
A dot-com company, or simply a dot-com , is a company that does most of its business on the Internet, usually through a website that uses the popular top-level domain, ".com" .While the term can refer to present-day companies, it is also used specifically to refer to companies with...
founded in Nevada
Nevada
Nevada is a state in the western, mountain west, and southwestern regions of the United States. With an area of and a population of about 2.7 million, it is the 7th-largest and 35th-most populous state. Over two-thirds of Nevada's people live in the Las Vegas metropolitan area, which contains its...
in 1996 by Craig Winn
Craig Winn
Craig Winn is an American author and former businessman. He has self-published five books, including several on terrorism and Islam. His longest book is called Yada Yahweh. Each of his books has been made available free on the internet....
and Rex Scatena, and relocated to Charlottesville
Charlottesville, Virginia
Charlottesville is an independent city geographically surrounded by but separate from Albemarle County in the Commonwealth of Virginia, United States, and named after Charlotte of Mecklenburg-Strelitz, the queen consort of King George III of the United Kingdom.The official population estimate for...
, Virginia
Virginia
The Commonwealth of Virginia , is a U.S. state on the Atlantic Coast of the Southern United States. Virginia is nicknamed the "Old Dominion" and sometimes the "Mother of Presidents" after the eight U.S. presidents born there...
in February 1998. Its business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...
involved connecting customers on the Web directly to manufacturers, with the intent of providing better pricing and faster shipping (a just-in-time model similar to those used by Wal-Mart
Wal-Mart
Wal-Mart Stores, Inc. , branded as Walmart since 2008 and Wal-Mart before then, is an American public multinational corporation that runs chains of large discount department stores and warehouse stores. The company is the world's 18th largest public corporation, according to the Forbes Global 2000...
and Dell
Dell
Dell, Inc. is an American multinational information technology corporation based in 1 Dell Way, Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest...
). Customers could order a wide range of products from VA's website, then VA would transmit the orders directly to the manufacturers, and the manufacturers would then package the products and ship them directly to the customer. Winn referred to this concept as "convergence commerce". Value America was backed by Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
co-founder Paul Allen
Paul Allen
Paul Gardner Allen is an American business magnate, investor, and philanthropist. Allen co-founded Microsoft with Bill Gates...
's Vulcan Ventures
Vulcan Inc.
Vulcan Inc. is an investment and project management company founded in 1986 by Paul Allen, co-founder of Microsoft, to manage his investments...
and FedEx
FedEx
FedEx Corporation , originally known as FDX Corporation, is a logistics services company, based in the United States with headquarters in Memphis, Tennessee...
co-founder Frederick W. Smith
Frederick W. Smith
Fred Sidney Smith III , or Fred Smith, is the founder, chairman, president, and CEO of FedEx, originally known as Federal Express, the first overnight express delivery company in the world, and the largest in the United States...
.
Initial Success
Value America's initial public offeringInitial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
in April 1999 was a success: on the first day the stock closed at $55 a share, valuing the three-year-old profitless company at $2.4 Billion.
Decline and bankruptcy
VA was plagued by communications problems with the manufacturers they worked with. At the time, the idea of selling directly to customers without a distributorDistributor
A distributor is a device in the ignition system of an internal combustion engine that routes high voltage from the ignition coil to the spark plugs in the correct firing order. The first reliable battery operated ignition was developed by Dayton Engineering Laboratories Co. and introduced in the...
involved was still new and not well tested among the large consumer products companies VA represented, and since VA had no warehouses, traditional supply lines couldn't be used. Shipments would be delayed, go missing, and arrive badly packed or with the wrong product inside. Billing was also a problem, and charge backs were difficult to perform due to the mishandling of shipped goods. VA was also harmed by problems with rebates on computers requiring the acceptance of long-term Internet access
Internet access
Many technologies and service plans for Internet access allow customers to connect to the Internet.Consumer use first became popular through dial-up connections in the 20th century....
contracts, a problem that also affected several mainstream retailers and which attracted the attention of the Federal Trade Commission
Federal Trade Commission
The Federal Trade Commission is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act...
. Also, many of the products Value America was trying to sell were easily available in many other places, making it difficult for them to compete by methods other than low prices. Towards the end of 1999, VA decided to lower its aims, drastically reducing its product catalog and focusing on information technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
products and office supplies, items that were sourced from traditional distributors. As the company floundered, Winn and executives enjoyed the 'dot-com lifestyle', spending large amounts of money on expensive perquisites such as private jets, as well as plans for a large campus that were never executed.
By 2000, Value America was failing due to the negative effect that the communication problems had on their customer service. The stock had fallen to 72 cents and Value America filed to reorganize under Chapter 11
Chapter 11, Title 11, United States Code
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most...
of the Bankruptcy Code on August 11, 2000. The remains of the company (in particular the custom supply chain management
Supply chain management
Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers...
system they had commissioned) were sold to IT product distributor Merisel in October 2000.