Boo.Com, the Failure

INTERNATIONAL trading Boo. com, Online Fashion Retailer, Goes Out of Business By ANDREW ROSS SORKIN Published May 19, 2000 It was supposed(p) to follow the dot-com fairy tale script. Two young entrepreneurs formulate an idea for the next big e-commerce Web point, raise enormous sums of cash, knock off lavishly on advertising, lose money on e very(prenominal) sale, matter the company public and make every employee a billionaire. Today, Boo. com, a European way of life e-tailer backed by the French luxury goods magnate Bernard Arnault, the Benetton family, Goldman, Sachs & high society and J. P.Morgan, among otherwises, is insolvent and has been forced to call the liquidators, six months after its Internet debut. The c one timeit for Boo. com seemed plausible enough. Ernst Malmsten and Kajsa Leander, two 29-year-old Swedes, founded Boo. com here in 1998, planning to create an online fashion retailer that would provide global service in s even off languages and multiplex curr encies. And, of course, the site would use the most advanced technology. Boo. com bragged of its ability to let users facial expression products in three dimensions from 360 degrees, giving them a true sense of how a garment looked.Investors were so taken with the idea and its two founders Ms. Leander had been an Elite mannequin and both had started an online bookstore called Bokus. com that Boo. com was able raise $125 million approximately immediately from an elite roster of the extremely wealthy. Before even first Boo. com, the founders promoted the site in trade journals and glossy fashion magazines. exclusively it was too clear that the founders were excessively ambitious. The company established its headquarters on swank Carnaby Street in London, with satellite offices in New York, Paris, Stockholm, Amsterdam and Munich.The supply expanded from 40 initially to much than 400. Employees routinely flew first classify and stayed in five-star hotels, according to a form er staff member. Many were accustomed laptops and Palm Pilots for home use, according to this person, and the company used Federal carry to send regular mail. They had very little spending restraint, to put it mildly, utter Noah Yasskin, an analyst at the London office of Jupiter Communications, an Internet research firm. The site itself was also plagued by technical businesss and delays, and took twice as long as anticipated to evelop. Once up and running, it became clear that users without fast connections to the Internet could not use the site, a point Boo. com boasted to the highest degree. That e-snobbery alienated customers with more modest modem speeds, which happened to be most of Europe and the United States, Boo. coms two most important markets. cardinal percent of European and 98 percent of U. S. homes lack the bandwidth needed to good access such animation, Therese Torris, an analyst at Forrester Research in Amsterdam, wrote in a report.And anyone with a Macintosh computer could not use the site. opus Boo. com later adjusted itself to allow users with slower connections and Macs to gain access, the changes came too late. gross sales for the first three months of the sites operation were $680,000, while the company was blowing through more than $1 million a month. The end came as Boo. coms founders, with only $500,000 left, struggled in vain to find backers to plow more money into the site. We are deeply disappointed that it has been necessary to ask KPMG to become liquidators of the company, the co-founders and investors utter in a joint statement. The senior management of Boo. com has made strenuous efforts over the buy the farm few weeks to raise the additional funds which would reserve allowed the company to go forward with a clear plan. Over the last several weeks, Mr. Malmsten and Ms. Leander, who in concert own about 40 percent of the company, had been pleading with investors to ante up more. According to a spokesman for Mr.Arnau lt He didnt want to take the risk. He would turn out been willing to stay involved if he could have had more control. In fact, in an interview in Paris several weeks ago about his Internet holdings, Mr. Arnault refused to discuss Boo. com. Whether Boo. coms failure presages further problems for clothing e-tailers is unclear. But roughly Internet analysts said Boo. coms rise and fall reflect a problem that goes beyond just selling clothes. . The market has woken up to the fact that the add of business e-tailers like Boo. om generate is a lot lower than we anticipated, said Tony Shiret, an analyst at Credit Suisse First Boston in London. A key turning point was what happened in the U. S. over Christmas, he added, referring to more online retailers that reported missed sales projections. Its been disappointing. On Wednesday, PricewaterhouseCoopers released a report predicting that 25 percent of all Internet companies in Britain could exhaust their cash deep down six months. Stil l, the problems at Boo. com problems were somewhat self-inflicted, Mr.Yasskin said. They tried to do too much, he said. Opening up in multiple countries simultaneously is impossible. One study stumbling block for Boo. com may simply have been the type of merchandise it was attempt to sell. If you look at successful sites, they are driven by price, Mr. Shiret said. It is very hard to sell clothing at a cost make that makes sense without the scale. Indeed, Boo. com never competed on price like most other retailers it hoped to woo customers with its interactive services and convenience.Nonetheless, Boo. com might be worth something, even if it is only a fraction of the $400 million value its founders once ascribed to the company. KPMG, which is managing the liquidation process, said today that it had received more than 30 inquiries. In an interview with The Sunday Telegraph earlier this month, Mr. Malmsten admitted he might have made missteps. We have made some mistakes and we wer e late with our launch, yes, he said. But people are welcome to come round here into our offices and see what is breathing out on now.