BBC Homepage World Service Education
BBC Homepagelow graphics version | feedback | help
BBC News Online
 You are in: Business
Front Page 
World 
UK 
UK Politics 
Business 
Market Data 
Economy 
Companies 
E-Commerce 
Your Money 
Business Basics 
Sci/Tech 
Health 
Education 
Entertainment 
Talking Point 
In Depth 
AudioVideo 

Wednesday, 16 August, 2000, 21:54 GMT 22:54 UK
The cost of the Living.com dead
Amazon.com screenshot
Don't click here! The "home" tab to the right of "health & beauty" has disappeared
High-profile investors like coffee retailer Starbucks and e-tailing giant Amazon are counting the costs after the bankruptcy of US online furniture and home products retailer Living.com.

Just four months ago the web site had been praised as "the best online furniture store" by e-commerce analysts Gomez.com. Now the site shows features only a terse statement, announcing that it will file for bankruptcy and sack 275 employees.


The recent downturn in the capital markets has substantially impaired our ability to raise the capital required to achieve profitability

Shaun Holliday, Living.com chief executive
Shaun Holliday, Living.com's chief executive, is quoted as saying that "the decision to close our store was an extremely difficult one", and concedes that the firm was no longer able "to raise the capital required to achieve profitability" as investors turn away from internet stocks.

The firm's collapse came as a nasty surprise to Amazon, which was both an investor and partner of living.com

Amazon was forced to remove the "home" tab on its top navigation, the entry point to a co-branded website of Amazon and Living.com. The home tab was added just three months ago.

'Trusted partners'

Amazon has expanded through a number of alliances with web retailers, describing them to customers as 'trusted partners'.

Living.com screen shot
All that's left from the Living.com shopping site
Most recently the firm linked up with the struggling web venture of toy retailing giant Toys R Us.

Other partnerships include auctioneer Sotheby's, health and beauty retailer Drugstore.com and jewellery shop Ashford.com.

Amazon spokesperson Patty Smith said: "We work to support our partners to enhance their likelihood of success. Many partners within the network are doing quite well."


The failure of Living.com will likely prompt some additional observations that e-commerce is not proving to be all some had hoped it would be

Henry Blodget, Merrill Lynch
In Amazon's most recent set of results, the firm acknowledged that its investments in web companies like Living.com were costing it more than $100m a quarter.

The latest web collapse will put Amazon even more in the spotlight. In recent weeks, a number of analysts have publicly doubted whether the Seattle-based company will ever be able to turn in a profit.

Henry Blodget, a much-watched Merrill Lynch analyst specialising in internet stocks, said: "It does reduce the overall addressable market opportunity and makes us less comfortable with Amazon's other investments and dot-com partner companies."

The company says it has plenty of cash to see it through to profitability. Investors, though, are wondering whether this forecast is correct.

Since the start of the year, Amazon's stock has fallen steadily from a $113 peak to about $38, with little sign of recovery.

Starbucks spill

Premium coffee retailer Starbucks, meanwhile, warned investors that it would have to write off a $20.6m investment.

That represents Starbucks' entire stake in Living.com, and the coffee shop chain warned that more dot.com failures could result in further writedowns.

Starbucks has investments in kitchen supply web site Cooking.com, online convenience store Kozmo.com and online community site TalkCity.

Chapter 7

Living.com is to file for bankruptcy under "Chapter 7" of the bankruptcy code, which spells the immediate end for a company.

As dot.coms burn through their cash, their assets and operating income rarely are substantial enough to allow an extensive reorganisation and restructuring under the protection of "Chapter 11".

A bankruptcy under Chapter 11 gives a business protection from creditors, and has helped many top firms through a particularly rough patch of their trading history.

Dot.coms, however, rarely have the business strength to achieve such a turnaround.

A rare exception is Value America, one of the larger and longer-living e-tailers in the United States.

The firm filed for Chapter 11 bankruptcy a week ago.

Search BBC News Online

Advanced search options
Launch console
BBC RADIO NEWS
BBC ONE TV NEWS
WORLD NEWS SUMMARY
PROGRAMMES GUIDE
See also:

16 Aug 00 | Business
Wine e-tailers merge
14 Aug 00 | Business
Internet hits Toys-R-Us
14 Aug 00 | Business
Lastminute nets French rival
11 Aug 00 | Business
Amazon, Toys R Us play together
06 Aug 00 | Business
Amazon condemned as 'terrible'
27 Jul 00 | Business
Amazon losses mount
08 Jun 00 | Business
Amazon launches new site
30 May 00 | Business
Dot.com gold rush ends
24 Jun 00 | Business
Amazon tumbles to year-low
18 May 00 | Business
The future of e-tailing
15 Feb 00 | Business
Amazon's fight for dominance
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories