Oh neat! What's your opinion on their collapse and do you think that kind of business model can survive today?
There was some general missteps that were glaring errors both from the outside and inside.
From the outside: no minimum order until a few months before the end. So you could order a pack of gum and a delivery person would bring it out to you. In bike messenger cities, it wasn't awful, but in car cities (Boston), it's brutal.
They also didn't focus on a particular series of products, they wanted to be "amazon in under an hour". Amazon's the only company I know of that's been able to pull off a "we sell everything" model and they didn't start that way (I think Amazon was still mostly books even as late as 2000/2001). That meant massive inventories sitting in warehouses in downtown locations (as opposed to Amazon's distribution centers in the middle of nowhere).
From the inside, setting staffing levels correctly early, expanding too quickly to second tier cities (as opposed to reaching profitability in the larger ones first), and inventory was awful. A couple of inventory stories:
"Why did we just get another 5 boxes of tootsie rolls in? I don't think I've ever seen us sell one." - Me
"We can't ever be out of stock on anything." - Boss
"Well, yeah but could we at least sell ONE box first?"
I was also there when someone fat fingered an inventory order. We were supposed to get 40 copies of The Green Mile for rent and wound up with 400.
I definitely learned a lot there and it was interesting. The model "could" work, but requires such a massive capital outlay and a lot of things to go right that I don't know if someone would be able to pull it off any time soon.