Boo hoo – Learning from the largest European dot-com failure Context
“Unless we raise $20 million by midnight, boo.com is dead”. So said boo.com CEO Ernst Malmsten, on May 18th 2000. Half the investment was raised, but this was too little, too late, and at midnight, less than a year after its launch, Boo.com closed. The headlines in the Financial Times, the next day read: “Boo.com collapses as Investors refuse funds. Online Sports retailer becomes Europe’s first big Internet casualty”.
The boo.com case remains a valuable case study for all types of businesses, since it doesn’t only illustrate the challenges of managing E-commerce for a clothes retailer, but rather highlights failings in E-commerce strategy and management that can be made in any type or organization.
Boo.com was a European company founded in 1998 and operating out of a London head office, which was founded by three Swedish entrepreneurs, Ernst Malmsten, Kajsa Leander and Patrik Hedelin. Malmsten and Leander had previous business experience in publishing where they created a specialist publisher and had also created an online bookstore, bokus.com, which in 1997 became the world’s third largest book e-retailer behind Amazon and Barnes & Noble.
They became millionaires when they sold the company in 1998. At boo.com, they were joined by Patrik Hedelin who was also the financial director at bokus, and at the time they were perceived as experienced European Internet entrepreneurs by the investors who backed them in their new venture.
The vision for Boo.com was for it to become the worlds first online global sports retail site. It would be a European brand, but with a global appeal. Think of it as a sports and fashion retail version of Amazon. At launch it would open its virtual doors in both Europe and America with a view to ‘amazoning the sector’. Note though that in contrast, Amazon did not launch simultaneously in all markets. Rather it became established in the US before providing local European distribution through acquisition and re-branding of other e-retailers in the United Kingdom and England for example.
The boo.com brand name
According to Malmsten (2001), the boo brand name originated from filmstar ‘Bo Derek’, best known for her role in the movie ‘10’. The domain name ‘bo.com’ was unavailable, but adding an ‘o’, they managed to procure the domain ‘boo.com’ for $2,500 from a domain name dealer.
According to Rob Talbot, director of marketing for Boo.com, Boo were “looking for a name that was easy to spell across all the different countries and easy to remember ... something that didn't have a particular meaning”.
The audience targeted by boo.com can be characterized ‘young, well-off and fashion-conscious’ 18 to 24 year olds. The concept was that globally the target market would be interested in sports and fashion brands stocked by Boo.com.
The market for clothing in this area was viewed as very large, so the thought was that capture of only a small part of this market was required for boo.com to be successful.
The view at this time on the scale of this market and the basis for success is indicated by New Media Age (1999) where it was described as “The $60b USD industry is dominated by Gen X'ers who are online and according to market research in need of knowing what is in, what is not and a way to receive such goods quickly. If boo.com becomes known as the place to keep up with fashion and can supply the latest trends then there is no doubt that there is a market, a highly profitable one at that for profits to grow from.”
The growth in market was also supported by retail analysts, with Verdict predicting online shopping in the United Kingdom to grow from £600 million in 1999 to £12.5 billion in 2005.
However, New Media Age (2005) does note some reservations about this market, saying “Clothes and trainers have a high rate of return in the mail order/home shopping world....
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