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Friday, 13 October, 2000, 17:04 GMT 18:04 UK
Urbanfetch delivers new net blow
Urbanfetch website
Urbanfetch's closing down sale has started
The trans-Atlantic internet retailer Urbanfetch has pulled the plug on its much vaunted home delivery service.

The news that it has been forced to abandon its home delivery service is a further blow to the increasingly unfashionable web retail sector.

Present market realities dictate that we focus our resources where we can make a profit in a much shorter time

Chief executive Ross Stevens

The company will instead concentrate on its express delivery service for big businesses in New York, which it says is profitable

Urbanfetch, launched a year ago, said it had 100,000 customers for its service, which promises to deliver virtually anything to your home within one hour of it being ordered.

But despite an average order size of $50 the firm remained a long way from profitability.

Business models

Chief executive Ross Stevens said that the dramatic fall from favour of dot.com companies since March meant that it could not expect to raise more funds.

"Present market realities dictate that we focus our resources where we can make a profit in a much shorter time frame than our [home delivery] business would have required," he said.

Until the tech stock bubble burst in March this year, investors were throwing money at dot.com companies.

Business models anticipated a few years of losses as the new wave of web firms grabbed the lion's share of each new market, in the way that Amazon had done with online book sales.

In theory, at some time in the future they would translate their huge market share into profits.

Other failures

While the value of anything web related was rising, investors were quite happy with this theory, as they saw the value of their stakes rise.

But since the bubble burst, many dot.coms have seen their values tumble, prompting investors to stop wanting to risk their money.

This in turn has left an increasing number of tech firms facing the prospect of running out of money before they start making a profit.

Urbanfetch's decision comes three days after pan-European music retailer Boxman collapsed.

It also follows the closure of the WebHouse Club - a grocery delivery part of Priceline.com which said it would shut down last week.

The announcement comes days after merger talks ended between Urbanfetch and its larger rival Kozmo.

Analysts said the closure was a sign that not enough people in major cities were interested in shopping online when they could pop out to a shop.

Urbanfetch is now to concentrate on its express delivery service which has 140 corporate customers in New York, and has moved into profit within six months of starting operations.

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See also:

11 Oct 00 | Business
E-tailer Boxman collapses
08 Oct 00 | Business
Investors watch dot.com clearout
22 Dec 99 | Business
Delivery at internet speed
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