BOO’S AFTERMATH: THE HYPE DIDN’T HOLD UP
Byline: Vicki M. Young / Janet Ozzard / With contributions from Rosemary Feitelberg
NEW YORK — As Boo.com, Europe’s first high-profile Internet failure, liquidates, the e-commerce crowd is watching to see who picks up the pieces.
KPMG, the financial services company, made Boo.com’s closing official Thursday and said it would consider selling the business as a whole or in two parts as a “going concern.”
Boo.com’s launch last year was distinguished by tremendous hype, lengthy delays and technical glitches. The site, said its founders, would set the standard for global e-tail. It was multi-lingual and multi-currency, designed with hip graphics and a merchandise mix of edgy streetwear, athletic apparel and hip brand names.
But once Boo worked out its system problems, other problems set in.
Two founders, Michael Skidmore and Patrick Hedelin, left within a year of the start-up. And as money flowed out with no return in sight, investors, including the very high-profile LVMH Moet Hennessy Louis Vuitton chairman Bernard Arnault, were said to be getting restless.
And after a desperate eleventh-hour scramble for more financing, Boo.com’s board of directors met late Wednesday night in London and decided to pull the plug. The 70 employees in the New York office went off the payroll immediately and the office will close officially Tuesday.
While much was made of Arnault’s involvement in Boo.com, an LVMH spokesman in Paris was quick to point out that LVMH’s had 8.5 percent of Boo.com. Reportedly, that was worth about $11 million.
The spokesman would not say whether Arnault was instrumental in making the decision to cut off funds. “We were with them until the last minute, looking for a solution,” he said. Could Boo’s closing put a chill on e-tail in general, or were its problems largely self-generated? Most observers say the latter, although they caution that e-tail is already straining its natural boundaries.
Marie Menendez, a retail analyst at Moody’s, the credit ratings agency, observed: “There’s no general answer yet on which companies will survive because they all have different strengths. But we do know that the number of retail venues are growing more quickly than the number of consumers shopping online.”
Karl Haller, principal consultant at PricewaterhouseCoopers, told WWD, “I don’t think [the Boo liquidation] means anything huge. This is just one of the more high-profile European companies, but I wouldn’t be surprised if they were acquired. Boo would be a good acquisition for someone trying to get into the global marketplace.”
Haller observed, “Boo had a good strategy in developing a fashion perspective. Its problems were more on the execution side, and it didn’t have much vendor support.”
Even though Arnault lost money on his investment in Boo, his name surfaced as a potential buyer. “Why not? He could buy it for his e-luxury group and get the whole thing dirt cheap. He has the vendor network to make it work,” noted one observer. The LVMH spokesman said he could not comment on that.
A spokesman for online sporting apparel and equipment site Fogdog Sports declined comment on overseas market rumors that it might bid for Boo. He noted, however, that the failure of Boo could be a harbinger of more consolidation in the business-to-consumer segment of the online shopping universe.
Puma will not be affected that much by Boo.com’s liquidation, since the e-tailer only ordered a few thousand units of fall apparel and footwear, said Darren Ross, Puma’s head of global interactive marketing and business.
“In general, dot com accounts are not pushing big numbers. That’s not their value,” he said. “I come from the world of start-ups, and generally we had a good experience with Boo. As an advertising and marketing vehicle, they were of tremendous value.”
Ross, who previously co-founded DNA Creative Design, a Web site design company, noted that e-tailers need to have their sites fully-serviced from a business standpoint before overdeveloping their brands.
At the MAGIC show in February, Fila picked up rumblings from other vendors that Boo.com had “internal problems, was spread a little thin and hadn’t launched as spectacularly as hoped,” said David Kahn, vice president of apparel.
At that point, Fila retrenched and decided not to show the company its fall line.
George Horowitz, president and chief executive officer of Active Apparel Group, the maker of licensed Everlast activewear, said that he was initially concerned about Boo after the launch was delayed.
“We remained confident after the delays because we knew they wanted to do it right and they’re bright people. But we watched the business cautiously,” he said. “It was such a massive undertaking with so many countries, the monetary conversions and so many different products and brands.”
AAG sold Boo.com $150,000 worth of Everlast apparel for spring, but backed off from any fall orders.
The e-tailer’s greatest downfall was that most consumers did not have computers equipped to handle Boo’s technology.
“Unless you had the most advanced equipment, you couldn’t get into anything. They assured us all along that consumers would be able to get to it. We consider ourselves pretty far along and we couldn’t get to it,” Horowitz said.