A BLIP AND IT’S GONE: E-TAILER EVE.COM SHUTS SITE DESPITE SUCCESS

Byline: Kerry Diamond

NEW YORK — The dot-com casualties continued to mount last week as Eve.com, the first of the major beauty pure-play sites to launch, shut its virtual doors on Friday.
Most of the e-tailer’s 164 employees were laid off and Eve.com chief executive officer Thomas Shull announced his resignation as managing director of Idealab, the Silicon Valley Internet incubator that bought a controlling interest in the beauty e-tailer earlier this year.
Although rumors about layoffs and fiscal difficulties at Eve.com were rampant, many of the site’s vendors were still shocked by the news. “I thought if anyone could keep it together, they could,” said Cristina Carlino, the founder of Philosophy, one of the best-selling beauty brands on Eve.com. “We’ve done great numbers with them.”
None of the vendors contacted by WWD had been told about the site’s termination. In fact, one vendor quickly grabbed a “five-figure” fragrance order headed for Eve.com off a UPS truck after being informed of the news.
According to a statement released by Eve.com, “it was determined that fundamental industry issues related to product supply would preclude the company from achieving an acceptable level of profitable growth in cosmetics alone. In addition, the company noted that it lacked adequate capital to reach sufficient operating scale.”
The brainchild of two business school graduates, Mariam Naficy and Varsha Rao, Eve.com went live in June 1999 as a beauty e-tailer specializing in niche brands. As consolidation swept the Internet industry earlier this year, Idealab bought a controlling interest in Eve this past April for an undisclosed sum. It has been reported, however, that Idealab issued approximately $50 million worth of put options to Eve’s key employees. Sources said Naficy and Rao hold $35 million of that. Shull, best known for helping usher Barneys New York out of bankruptcy as the specialty store’s ceo, was named head of Eve.com. Naficy was put in charge of marketing and business development, while Rao was given merchandising and new category development to oversee.
This summer, Eve.com expanded its product range to include accessories and jewelry, a move that sources said was well received by customers. The jewelry department was run by Naficy, while Rao handled the beauty and accessories side of the business.
Rumors about layoffs and other problems began to plague the site this month and Eve officials announced last week that they were “exploring various opportunities.” On Wednesday, Idealab founder Bill Gross announced that his company has postponed its IPO because of the current market conditions.
Eve.com was closed down, without warning, on Friday morning and replaced with a single page addressed to “Dear friends of Eve, We hope that shopping with us has been a ‘beautiful’ experience. Thanks for your support.”
A participant in the popular Makeupalley.com beauty bulletin board reported that the site went down as she was shopping on Friday. “Yeah, I was right in the middle of looking at Nars and I couldn’t bring up any other items,” wrote “ZB.” “Then I kept getting weird screens. Then the messages that they are no more and no more orders filled, no back orders and bye-bye…just like that! Right during a visit+no warning.”
Vendors were baffled as well because of the healthy volume of business they were doing on Eve.com.
“I’m so surprised because business has been excellent,” said Joey Roer, chief executive officer of Joey New York. “Charla Krupp [Eve’s editor in chief] went on the “Today” show recently and mentioned our Line Up product. That day, Eve.com sold 900 pieces of that product alone. We wound up selling thousands of them that month.”
“I’m shocked that they couldn’t keep a presence up through the holidays and find a buyer,” said Chris Gable, co-founder of Demeter. “Sales were very good in the last five months and they seemed to get a fair amount of traffic. A lot of people in the industry liked the site and I think Mariam, Varsha and Charla and some of the other employees helped engender that.”
In fact, sources said Eve.com was doing well financially, but that Idealab didn’t want to put more money into the site unless Naficy and Rao were willing to give up some of their put options and have that money invested in Eve.com. The sources also said Eve.com officials had been in talks with other companies about a merger or acquisition.
“After examining every alternative, the company regretfully concluded that liquidation is the only viable option,” read the Eve.com statement.
Naficy did not return calls made to her San Francisco office on Friday. Rao chose not to comment.
Also according to the statement, a skeleton staff of personnel has been kept on board to handle all orders that were received as of midnight Thursday. Back orders would be cancelled.
The past year-and-a-half has been a wild roller coaster ride for the beauty dot-com world. After Eve.com launched in June 1999, dozens of sites followed, like Beauty.com, Gloss.com, Sephora.com, Ibeauty.com, Bluemercury.com, Beautyjungle.com and Beautyscene.com. Millions of dollars were spent on advertising, parties and promotions.
Last January, Beaut-
y.com announced it was acquired by Drug-
store.com in a stock transaction worth nearly $45 million. Drugstore.com’s stock value has since plummeted and major executives have left the site. (See related story, this page.)
In March, Beautyscene.com shut down temporarily as it looked for new investors to help it through a “cash crunch.” Last month, Ingredients.com, the bath and body line sold exclusively on a single company-owned site, shut its Web site operations because of financial difficulties. The company now wholesales the line.
The biggest beauty e-tail news occurred in April when Estee Lauder Cos. announced its intention to purchase Gloss.com and turn the e-tailer into the home site for all the Lauder brands. In July, Chanel, Clarins and Lauder announced a ground-breaking partnership in which all three companies would share ownership of Gloss.com, which is scheduled to launch in early 2001.
The specter of Gloss.com, with its power-packed assortment of best-selling brands, no doubt was a factor in the decision to shut down Eve.com.
One Eve.com vendor said the site’s demise simply showed the realities of making a living online.
“I do think they had all the right stuff going,” said Jean Danielson, the co-founder of Benefit, another of Eve.com’s best-selling brands. “It was a wonderful door to be in and the whole group was really on the ball.”
But knowing what the Benefit Web site does in terms of sales and the challenges of e-tailing, she added, “If I had to rely on a Web site as the sole moneymaking entity for my company, I would lose sleep at night.”
When Naficy and Rao hatched their plan for a beauty e-tailer that would help make women’s lives easier by providing hard-to-find brands and an easy way to replenish their favorite items, they wanted a catchy name that would perfectly sum up their vision. Naficy’s mother and Rao came up with the name Eve.com, but there was a problem. A seven-year-old girl named Eve Rogers had already registered the name.
Naficy was given the task of negotiating with Rogers.
“I had no idea how to deal with a child,” Naficy told WWD. “I was like, ‘Do you like your domain name?’ She said yes. I said, ‘Would you like to sell it?’ She said no. I should have put an experienced parent on the phone.”
Naficy wouldn’t say how much the company wound up paying, but Rogers’s perks included a $500 gift certificate from eToys, a computer, a family trip to Disney World and “a tiny bit of equity” in the company.
If Rogers acts fast, she might be able to get her domain name back.

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