It's a tragedy that everybody's favorite whipping boy Webvan was started at the height of the dot com boom; that doomed it to failure. I'm pretty sure that if Webvan were founded today, they'd have a real shot at success, because a number of things have changed since then: higher web penetration, better inventory management systems and tech like RFID, and most importantly, much better recommender systems and targeted marketing technology that would offer a valuable secondary source of revenue through the web interface.
Even given that Webvan was founded in '98, it could still have succeeded had it not made some spectacularly bad decisions. From the wikpiedia page:
They poisoned that market for everyone—nobody is going to fund an online grocery startup for perhaps the next decade or so. There are a number of small players left, but none that can reap the benefits of the economy of scale and compete with brick and mortar chains. And they all have crappy web-1.0 era style interfaces that hurt my eyes.
Would you buy from an online grocery? Why or why not?