Trims its Bottom Line

SAN FRANCISCO (01/26/2000) - In the first sign of trouble for the e-commerce site, laid off some 70 employees Tuesday. The layoffs, which comprised editorial and customer relations staffers in its New York and European offices, comes less than three months after the international fashion boutique's launch.

Jay Herratti, president of North America, downplayed the layoffs, calling it a normal post-Christmas "headcount reduction."

"We looked across the business where we have overcapacity," and made cuts, he explained. He acknowledged some cuts were in the editorial operation. He explained that the editorial staff - hired to furnish the site with timely articles on pop culture and fashion - were "a lot of" freelancers and contractors. He gave no more specifics about the layoffs.

However, he did say that is reevaluating its editorial strategy.

"Originally, we envisioned setting it up as a separate magazine," Herratti said. Now, the original editorial content will be integrated more directly into the site, as opposed to coexisting as a separate online magazine, he said.

The tale of has been one of lofty ambitions and about-faces. Backed by an impressive roster of clients, including French luxury magnate Bernard Arnault, caught the media's attention last summer. It planned to launch simultaneously in more than a dozen countries.

But the company bit off more than it could chew. The site didn't launch until the first week of November, almost six months behind schedule. Meanwhile, a pre-launch $25 million marketing effort had come and gone. When the site finally launched, it took a few weeks before kinks and bugs were worked out so the site wouldn't suddenly freeze on shoppers. A warning on the site still cautions it is designed for users with 56Kbps modems. "It will work with slower modems, but your download times may be slower," the site reads.

Observers also questioned the company's ostensibly costly operations. Aside from a hefty ad budget that included buys in glossy publications such as Vanity Fair and on cable television, the company operates in New York in a very trendy West Village neighborhood. Its London headquarters are situated in a trendy neighborhood.

Herratti defended Boo's operating budget, saying the layoffs are not an indication that the company needs to cut costs. "We were very pleased with Christmas. Our investors were very pleased," he said.

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