Value America

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Value America or VA (valueamerica.com, va.com) was a dot-com company founded in Nevada in 1996^[1] by Craig Winn and Rex Scatena, and relocated to Charlottesville, Virginia in February of 1998^[1]. 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 would order a wide range of merchandise, including caviar, gas grills, and desktop computers on VA's website, then VA would transmit the orders directly to the manufacturers, who would then package the products ordered and ship them directly to the purchaser, a concept Winn referred to as "convergence commerce".^[2] Value America was backed by Microsoft co-founder Paul Allen's Vulcan Ventures, as well as by FedEx co-founder Frederick W. Smith^[3], and issued an initial public offering in April of 1999.

[edit] Initial Success

Value America's Initial Public Offering was a success; the stock closed on the first day at $55 a share, valuing the three-year-old profitless company at $2.4 Billion, making founder Craig Winn one of many dot-com billionaires.

[edit] Decline and bankruptcy

Twelve months later, Value America filed for Chapter 11 bankruptcy protection, and the stock had fallen to 72 cents.

VA was plagued by communications problems with the manufacturers they worked with. At the time, the idea of selling directly to customers without a distributor 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, or arrive badly packed or with the wrong product inside.^[1] Billing was also a problem, and chargebacks were difficult to perform due to the mishandling of shipped goods.^[1]^[4] 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.^[5] Also, many of the products Value America was trying to sell were easily available in many other places (including most retail stores), making it difficult for them to compete by methods other than low prices; as 1999 ended, VA decided to aim lower, drastically reducing its product catalog and focusing on information technology products and office supplies^[6], items that, ironically, were sourced from traditional distributors.^[1] As the company foundered, Winn and executives enjoyed the dot-com lifestyle, lavishing money on expensive perquisites such as private jets, as well as plans for a large campus that were never executed.^[3]

By 2000, Value America was failing due to the negative effect the communication problems had on their customer service, and declared bankruptcy and shut down in August of 2000.^[3] 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 of 2000.^[7]