Online fashion retailer Boo.com, a splashy symbol of 1999’s e-commerce explosion, announced Thursday that it will liquidate its assets after recent failed attempts to get more cash from its backers or find new investors or buyers.
The high-end clothing retailer, which recently described itself as “the first truly international e-commerce site,” said it has hired KPMG to liquidate the company’s assets.
Bedtime for Boo
With 300 employees losing their jobs — and the millions of dollars invested Boo.com unlikely to be recouped in a Chapter 7 bankruptcy — Boo.com may now become a symbol of the shakeout that analysts say will claim more than half of all online retailers by the end of 2001.
Based in the United Kingdom, Boo.com had offices around the world, including U.S. headquarters in New York City. Founded six months ago by three partners — including two well-known fashion-industry figures — Boo.com quickly burned through the $120 million (US$) worth of initial capital it raised last year.
In recent weeks, the company reported receiving an emergency infusion of $30 million, led by majority backers LVMH. Unfortunately, the cash did not come through.
Ernst Malmsten, who co-founded the site with former model Kajsa Leander, told The Financial Times of London that the company should have kept stronger control of costs. “We have been too visionary,” he said. “My mistake has been not to have a counterpart who was a strong financial controller.”
Critics of Boo.com say the retailer focused too much on a flashy, cutting edge design for its site, which featured 3-D photographs and technology allowing customers to zoom in on different parts of a product and dress mannequins in different outfits.
Some analysts also say that Boo.com spread its initial resources too thin by targeting 18 international markets at once. The site is available in seven languages, and offers customers in most markets free shipping and free returns. Boo.com also staffed its customer call centers with multilingual representatives.
The company had trouble from the start. After just 12 weeks in business, Boo.com began thinning out its staff, with a layoff of ten percent of its workforce, all the while trying to project an image of success. At the time, the company attributed the layoffs to the seasonal nature of the retail industry.
While the site was novel, innovation did not translate into sales. Net revenues for the fourth quarter ended January 31st totaled only $680,000 (US$). Although the company raised $120 million in 1999, it appeared to spend the money as fast as it received it, advertising in offline magazines such as Details, Mademoiselle, Glamour and Vibe.
By February 2000, the company had lost two of its top executives. Chief Financial Officer Dean Hawkins left to join Chello Broadband NV, a Dutch Internet service provider. Hawkins’ departure came on the heels of the exit of one of Boo.com’s three founding members, Executive Chairman Patrik Hedelin.
Even with executives bailing out and technology which did not always work, Boo.com continued to forge ahead. A marketing partnership with CDNow was announced earlier this year. Additional pacts with Yahoo! sites across Europe and others were also unveiled.
Massive Financial Loss
The failure of Boo.com is going to be a harsh sting for many of its European financial backers, who had hoped to see the company offer stock in the near future. Initial investors included Europ+web and 21 Investimenti, a private fund controlled by clothing maker Benetton Group.
Other backers of the site included Goldman Sachs, J.P. Morgan, the Benetton family and Bernard Arnault, chairman of LVMH, Louis Vuitton Moet Hennessy.
As for the value left in Boo.com, Jupiter Communications analyst Heather Dougherty said in early May that “there’s potential for a supplier to come in and grab the technology. Maybe a luxury goods maker, because the way they present merchandise is great.”