TheSpot Succumbs to Financial Woes

[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.

The second site, BeautySpot,
launched in April, with health information and retail site HealthSpot quickly following, but
with slightly less fanfare than its predecessors.

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.