Boo.com Failure Raises Questions

BOSTON (06/08/2000) - Starting an e-business can be easy. Taking it apart is painful.

Take the high-profile fashion Web site Boo.com Group Ltd., which folded last month. It was one of the biggest e-commerce failures to date in Europe and came at the same time other online retailers, including Toysmart.com Inc. and Brandwise.com LLC, were calling it quits.

Boo.com's software and intellectual property were bought by Bright Station PLC, a British information technology firm. The company's domain and brand names went to New York-based portal Fashionmall.com Inc.

But according to liquidators at KPMG International, the British accounting and consulting firm that handled Boo.com's liquidation, the process of dismantling the company was definitely a challenge.

KPMG had to sell off a company with little, if any, tangible assets, said KPMG liquidator Jim Tucker. Boo.com's computers were leased, and its software, though cutting-edge, was partly licensed.

What Boo.com did own was the information inside the heads of its developers.

But those developers weren't inclined to stay at a bankrupt Internet company for very long, said Tucker.

"Companies such as this are highly dependent on a small number of key IT people with whom the vast amount of the knowledge resides," Tucker said. "That's why we had limited time to sell Boo.com."

Andy Dancer, chief technology officer for e-commerce at Bright Station, said Boo.com's software, which Bright Station bought for $374,900, is quite advanced. He said he was tickled to get the software at a price that was about 0.6% of the cost of developing it.

He said Bright Station plans to use the Boo.com software - which was used to take orders in several languages - to market to other online businesses that want to localize their products for consumers in other countries.

Going Mainstream

The Boo.com and Toysmart.com failures may be a sign that online boutiques geared toward niche markets aren't about to win over the customers of mainstream retailers.

"The largest [online] clothing retailer out there is J. C. Penny," said analyst Harry Wolhander at ActivMedia in Peterborough, New Hampshire. And the key to J.

C. Penny's success isn't the expensive and eye-popping graphics but the reliability and trust in a brand name, he said.

"Think L.L. Bean," Wolhander said. "You say, ‘Oh my God, I can send my shoes back after 20 years and get them re-soled.' "Alan Alper, an analyst at Gomez Advisors Inc. in Lincoln, Massachusetts, said even clicks-and-bricks like Toysrus.com have had problems filling orders in a timely fashion. But they can rebound because their brand names will bring customers back, he said.

Going mainstream is what Boo.com will do in its next life.

Ben Narasin, CEO of Fashionmall.com, said his company isn't very identifiable outside the U.S., so he plans to combine Boo.com's European name recognition with Fashionmall.com's local success.

A smart move, said Wolhander. "Look at all that money that Boo spent to promote the brand," he said. "Fashionmall actually knows how to execute that stuff."

Narasin plans to simplify the site with a smaller bandwidth requirement to make it easier for customers to navigate. Because Fashionmall.com doesn't sell products directly, it doesn't need the attention-grabbing graphics, he said.

"It's the difference between what you see on the runway and what you see in the store," Narasin said. "We do it simpler, cleaner, faster."

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More about: ActivMedia, Brandwise.com, fashionmall.com, Gomez Advisors, IT People, KPMG, L.L. Bean
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