On the drawing board, it sure seemed like a great idea: sell expensive designer sportswear online from a super-cool site that pushed the boundaries of technology. And do it on a global basis with a fun name: boo.com. Certainly top investors including Goldman Sachs and Bernard Arnault, the French fashion tycoon, were sold. They poured big money into the project, about $125 million. But last week, after just six months online, the boo bubble burst. Down to its last $500,000, London-based boo.com called in the liquidators, leaving more than 300 "boocrew" potentially unemployed.
Joint founders Ernst Malmsten and Kajsa Leander pulled the plug after talks with investors for a fresh injection of $30 million broke down. Though "deeply disappointed" the pair insist that within "boo.com there is a formula for a successful business." Many experts disagree. "There have been doubts about its core business plan for some time now," says Ian Charles Stewart, managing director of a private equity company within the Rothschild group. Online clothing retailing remains a tiny market, and most shoppers look for discounts. But boo.com offered no regular bargains, and only had sale items when forced to by circumstances.
And while the site was cutting-edge, it was slow to download, limiting its mass appeal. Says Mike Godliman, a director at retail consultant Verdict Research: "When you have hundreds of millions of pounds of inventory, you need to reach hoi polloi."
Boo.com's demise coincided with a report by consultant PricewaterhouseCoopers indicating that other firms face a similar fate. It predicts that 25 of the 28 dotcoms listed on British stock markets will spend their available cash by August 2001, citing heavy outlays on advertising and technology as being behind the unsustainable cash burn of many of these upstarts ... er, start-ups. Even before the report, recent market turmoil among Internet stocks had already given investors the willies. Now they're likely to be further spooked by a boo.