RealTime IT News

E-Tail Sector Suffers Another Casualty

Not even one of the most successful e-commerce sites around could save Living.com, which this week laid off all 275 of its employees.

The Amazon.com-backed online furniture store closed its doors Tuesday despite being highly-regarded for its products and service. The drying up of venture capital, which the e-commerce sector has suffered the last several months, forced Living.com's hand and caused it to file for Chapter 7 bankruptcy.

It marked the first time Amazon.com, which has amassed a number of investments in online businesses over the past year, saw a closely-vested associate fail.

The giant firm took an 18 percent stake in Living.com in February before the stock market about-faced and turned coldly bearish on e-commerce sites. In exchange, Living.com paid $145 million for a five-year deal with the online superstore and took up residence under Amazon.com's "Home Living" tab.

Hints of Living.com's troubles surfaced in May when the e-tailer laid off 50 employees to cut costs. That came after a multitude of other dot-coms, including Toysmart.com and Kozmo.com, closed their doors or laid off scads of employees.

"The decision to close our store was an extremely difficult one," Living.com chief executive Shaun Holliday said in a statement. "Despite our employees' tremendous efforts and the loyalty of our customers, the recent downturn in the capital markets has substantially impaired our ability to raise the capital required to achieve profitability.

Jeff Quinn, e-commerce analyst with Gomez Advisors, which recently ranked Living.com one of the best online furniture stores, said Living.com essentially caved in under the pressure of its payment to Amazon.com and infrastructure costs.

"I think a lot of their expenses were associated with building out the infrastructure of the site," Quinn said. "They had a great user interface, but they needed to make sure that it tied in appropriately to the manufacturers on the back end and to the delivery to the consumers. That's a very expensive endeavor. Given that and the number of online consumers that are shopping for furniture, which is such a nascent industry in the online community, it's really hard to overcome that kind of expense."

But does Quinn think Amazon.com will beg off from keeping the "Home Living" tab on its site? Absolutely not.

"I think it's a category that they have been committed to in the past, and it ties into a lot of the online consumers," Quinn said. "I think that consumers are interested in purchasing furniture and home furnishings online and if they want to continue to do this I think they'll probably find an alternative partner to fill out that tab, and continue to build their business around that."