Top web retailer collapses

Launched to a fanfare of publicity

European online clothing retailer Boo.com has collapsed through lack of funds, just six months after it launched to a huge fanfare of publicity.

We have been too visionary - we wanted everything to be perfect and we have not had control of costs

Boo co-founder Ernst Malmsten

But the firm's liquidators, KPMG, says that it has already received 30 offers for the company and expects to sell it as early as within one week.

Boo.com fell apart after investors failed to stump up an additional $30m (£20m).

Customers are unlikely to be affected by boo's collapse. They have to pay for their orders by credit card, and the card companies have to return the money should boo fail to deliver.

Some 300 staff, though, will lose their jobs, 200 in the UK, in Europe's first major dot.com failure. Contractors may also lose out, several have reportedly not been paid for months.

'Anarchic' meeting

Company management and liquidators KPMG met with staff and contractors on Thursday morning, near the firm's headquarters in Carnaby Street.

Staff were told that they would receive redundancy pay of only £800 each.

One employee said the "meeting got a bit anarchic" as "people were obviously very angry".

But some of boo's highly-qualified workers are likely to find work soon. Recruitment agents were seen handing out cards to staff leaving the building.

Failed global ambitions

The company, with offices in London, Stockholm, Paris, New York and Munich, launched with the goal of being the world's "first truly online retailer of sportswear and fashion".

Boo has taught people some very hard lessons about remembering the business plan

Peter Misek, analyst

Boo's problems have centred on its inability to build up numbers of buying customers fast enough, to generate revenues to offset steep set-up costs.

Generously funded to the tune of some $120m (£80m) last year, Boo counts among its shareholders French entrepreneur Bernard Arnault, the chairman of luxury goods maker LVMH, Italian clothing group Benetton and investment banks JP Morgan and Goldman Sachs.

Site foundered despite the best efforts of Miss Boo

Its fashionable range of sports-oriented designer clothing won admirers, as did its all-singing, all-dancing website.

But, initially at least, a large proportion of its potential market was unable to use Boo's site because the website design was too advanced for most computers and access frustratingly slow.

Blow to investor confidence

The failure of such a high-profile internet start-up could undermine investor confidence in the whole business-to-consumer online retail sector.

The owners issued a personal statement, which said: "We are deeply disappointed that it has been necessary to ask KPMG to become liquidators of the company.

"The senior management of Boo.com has made strong efforts over the last few weeks to raise the additional funds which would have allowed the company to go forward with a clear plan."

They added: "We believe very strongly that in Boo.com there is a formula for a successful business, and fervently hope that those who are now responsible for dealing with the company will recognise this."

Boo's woes coincide with a study commissioned by accountants PricewaterhouseCoopers, which found that one in four internet firms recently floated in London is in danger of running out of cash within the next six months.

PwC said that 25 out of 28 listed companies could use up all their cash reserves by August 2001 - well before most were expected to break even.

Marketing and technology costs are being seen as responsible for the fast rate of "cash burn".

PwC said that the hunger for funding would be likely to hasten the pace of consolidation in the sector, driven by the need to generate savings and enhance revenue.

It also said business-to-business companies were far more likely to get extra funding than business-to-consumer.

Rock the sector

Chase H&Q analyst Peter Misek said of Boo: "It was the largest internet [retail] funding ever in Europe and has taught people some very hard lessons about remembering the business plan."

Boo has been dogged by difficulties since it was set up by three Swedes, Ernst Malmsten, Patrik Hedelin and former model Kajsa Leander, with the intention of creating a global brand.

Technical snags delayed its launch until last November and it was then forced to discount some of its products by 40% and cut 90 jobs.

It has also lost three of its managers, including finance director Dean Hawkins who quit to join another internet firm.