TheSpot Succumbs to Financial Woes
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[Sydney, AUSTRALIA] Australian online retail network TheSpot has yielded to capital troubles, and sold its business to established physical retailer David Jones.
Under the agreement, David Jones will acquire TheSpot's technology, infrastructure, intellectual property and some of its staff. These assets will be absorbed and incorporated into David Jones' own developing e-tailing strategy.
David Jones will also continue to work with TheSpot's technology partner Cortex eBusiness as part of the deal, and will utilize the e-tailer's warehousing facilities in the Sydney suburb of Artarmon as a central part of its own e-tailing plans.
TheSpot established its business last September with the launch of online toystore ToySpot . Co-founders Alison Harrington and Justin Punch planned for this site to be the first of a six e-store network, that would cover key retail niches.
These three sites will now cease trading from June 30 as part of the David Jones acquisition.
While TheSpot co-founders Alison Harrington and Justin Punch believe the David Jones purchase is a recognition of the potential of the company's technology, it does put an end to what initially seemed to be a strength-to-strength e-commerce success story.
To help develop its brand against competition such as fellow online toy retailer ToyBox and online department store dstore, and gain registered users, ToySpot was the first Australian site to use innovative U.S. 'online scratchie' technology.
The company also embarked on heavy offline campaigns to promote ToySpot and BeautySpot.
TheSpot had intended to launch a bookstore site and formed an alliance with physical book retailer Angus & Robertson in May, as part of a larger deal with New Zealand online retailer Flying Pig. This deal was scuttled a few weeks later, however.
According to Punch, TheSpot's model was also weakened by the stock market, where the well of once free-flowing capital is rapidly drying up in the wake of June's global stock market correction.
TheSpot's business plan always anticipated a third capital-raising in June 2000. "Changes in the availability of capital in our sector, however, necessitated a change in strategy from further funding to an arrangement with brick and mortar players," said Punch.
There was industry speculation as early as last week that David Jones would step up as ToySpot's suitor in any takeover talks, although neither party would confirm the rumor.
TheSpot was forced to take this measure when major shareholder f2 Investments, a 50-50 joint venture between Amazon.com and Fairfax online subsidiary f2, withdrew its offer to contribute to third round capital. The spot was seeking to raise as much as AUD $10 million (US $6 million) from third round shareholders, who quickly followed f2 Investments' departure.