[May 18] The collapse of European online sportswear
retailer boo.com was the
result of poor execution of a good idea, according to
analysis by Forrester Research.
In a memo distributed to journalists, Forrester’s
Dr. Therese Torris asks: “Why did boo.com flame out so fast?”
— and answers by saying that the firm failed to do what
it promised, namely to enhance clothing presentation
through online innovation.
“Its reputation as a cumbersome and slow site still
sticks even though it’s now simpler and faster,” says
Dr. Torris.
After failing to secure a further round of funding, boo.com
called in receivers KPMG to wind up the company and salvage
as much value as possible from it. 300 staff will lose their
jobs, 200 in London and the rest in New York, Stockholm,
Munich, Paris and Amsterdam.
The collapse had been approaching for several weeks,
with sales growth failing to meet expectations and
investors growing increasingly nervous. An overspend
on PR and advertising also contributed to the downfall,
with $25 million burned offline on TV, radio, and fashion
magazines like Elle in a six-month period.
However, by far the biggest factor was the extraordinarily
complicated design of the boo.com site, with fussy, pop-up
windows, pictures so tiny they needed to be zoomed even
to identify color, and a “dressing-room” feature that
disappeared whenever the user chose to try on a new item.
Seeing a breathtaking quarter of a billion dollars spent
a such a venture, experts now fear that e-commerce will
be given a bad name, at least in Europe. The major backers
of boo.com included Europ@web, the investment vehicle of
French luxury goods group LVMH, and 21 Investimenti,
funded by Italian clothing giant Benetton.
40 per cent of boo.com’s equity was held by partners
Ernst Malmsten and former model Kajsa Leander. Malmsten
told the Financial Times that he believed the pair had
been “too visionary,” wanting perfection but losing
control of costs.
Although boo.com had backtracked in recent weeks,
bringing out a paper catalog to supplement its online
presence, bankruptcy was inevitable as funding dried
up.
The lessons for other online retailers appear to be:
keep costs down, create a user-friendly design, and
make sure your backers never lose their nerve.
