Funding Dries Up for Euro E-Retail

LONDON (08/04/2000) - It's been a bumpy week for Europe's online retailers. On Monday, the British-based health-and-beauty e-retailer Mango Planet Ltd.'s went spectacularly bust, announcing it would shut down in September, only three months after setting up shop. And on Thursday, the pan-European Internet toy retailer Toycity, which was based in Denmark and had operations in 15 European countries, filed for bankruptcy protection.

In both cases, the reason cited for the shutdowns was lack of funding. Coming on top of international fashion e-retailer's collapse in May, the news sent shivers through Europe's struggling business to consumer sector.

The week's good news - or ok-ish news - was the announcement from British on-line travel site that it had cut its losses to 9.27 million pounds (US$13.87 million) for the quarter ending 30 June 2000, down from 11 million pounds($16.46 million) for the same period last year. Lastminute also claimed a 50 percent increase in registered users - now exceeding 2 million, of whom almost a third are outside the U.K. The news left the market distinctly unimpressed:'s shares closed down 2.3 percent on Thursday.

By anyone's standards, is a minnow swimming in a pool of sharks.

But it is the U.K.'s best-known and most hyped internet start-up - its IPO in March this year was headline news here - and its performance is sometimes seen as a metaphor for the whole of the British b-to-c industry. That it is surviving is good news in itself.

The now-defunct Clickmango wasn't a particularly big company either: It employed 20 people and could boast only a reported 100,000 pounds ($149,600) in annualised sales, but it too was well-hyped and well-connected. The most repeated story about the company - which may or may not be apocryphal - was that its founders raised 3 million pounds ($4.49 million) in a space of eight days to launch it. The fact that they then couldn't raise a further 300,000 pounds ($448,800) over the next few months to keep it afloat is therefore all the more telling.

Toby Rowland, a Clickmango founder, who is also the son of one of the City's most colourful entrepreneurs of the 70s and 80s, the late "Tiny" Rowland, has said the "white-hot competition" in the online health and beauty sector was the major factor in his company's demise. "I don't see anyone surviving [it]", he added.

The e-retail shakeout in Europe is "pretty much inevitable and just starting," according to Rebecca Ulph, media analyst for Forrester Research Inc. in London.

"The tendency online is to cut prices to create brands. That means losses in the short term, which require deep pockets to fund. Not everybody is going to go out of business, but there's certainly going to be a lot of companies which aren't going to survive until they start making money."

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