Boo.com: spend, spend, spent

Feature

Boo.com: spend, spend, spent

Boo.com was a spectacular example of catastrophic e-business decisions

The demise of high profile European Internet retailer Boo.com last month indicates how few dotcom companies are going to survive in the long term.

Even though most dotcoms would claim otherwise - and, yes, some will survive - it is now clear that most lack the management savvy, the technological nous and the financial rigour to really challenge bricks-and-mortar companies.

Some, as Boo.com proved, will simply succumb to the temptation to build intra-company empires, eliminate cost controls and indulge in what can only be described in Boo's case as profligate spending of investors' money.

The collapse of Boo showed that the digital clock is at 23.55 for many would-be Cinderella dotcoms. Reality finally bit for those who thought they were indestructible.

Now, most know they are living on borrowed time (and money).

Investors in business-to-consumer start-ups were already getting cold feet, and although there is still venture capital money around for a winning business-to-business idea, the main winners from Boo's collapse may turn out to be bricks-and-mortar companies.

According to a new report issued by Price Waterhouse Coopers, one-in-four UK Internet companies will run out of cash within the next six months, and the majority will be out of cash within 15 months.

The survey, which examined the average "burn rate" - that's the amount of time it takes a dotcom to use up its cash before having to take around its hat again to investors - was just 15 months, and some managed just less than 12 months.

The trend won't be confined to European companies either. A survey by the Forrester research group predicted that the majority of dotcoms will be out of business by 2001, and the survivors will have to dramatically revamp their business plans.

So what really went wrong? Fashion e-tailer had an estimated burn rate of around $1m a week. For companies debating whether they should be satisfying the "need for speed" or getting their site - and back end - ready, Boo is a classic case study.

It launched five months late in November 1999, with a collection that was already out-of-season. There were major problems with technology too. Many users found that when they attempted to access the newly-launched site, they could not get on because their systems were too slow to download the innovative but processing-hungry 3D images.

Boo's plans were so ambitious that even consultants - not usually slow to spot a lucrative business opportunity - decided this was one they couldn't do or more likely, didn't want to work on.

Just as Carnaby Street epitomised the cutting edge London fashion scene in the 1960s, Boo was the standard bearer for sexy European e-commerce. Both of them spent all too short a time under the spotlight.


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This was first published in May 2000

 

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