Boo.com: Poster Child for Dot.com Failure?

E-BUSINESS ASSIGNMENT

Institute of Management
Christ University, Bangalore

By
KURAPATI RAGHAVENDRA PRAJITH
1527518

Case Study;Boo.com: Poster Child for Dot.com Failure?

Introduction
Boo.com was a company founded by two 28-year-old Swedish friends Ernst Malmsten and Kajsa
Leander in 1998. Boo.com seemed to be very promising at its time cause both of them had made
another site Bokus.com which became the third most sought after online book store after
Amazon and Barnes & Nobles. Boo.com before launch was said to be a revolutionary site which
offered sports goods at the same price as retails store. Both the founders were later joined by
their new partner Patrik Hedelin, an investment banker at HSBC Holdings. The site targeted
customers who were cash rich but time poor. The site had boasted many features such as ease
of use,7 different languages, advanced search engine based on size/sport/brand/style/colour, fast
delivery,18 currency acceptance, customer service line and even a virtual assistant Miss. Boo
who would advice customers in what product would be optimal for their use. Later J.P Morgan
and several other investors had also backed the initiative which many other angel investors had
rejected them. Although the company had announced its launch in June they had to postpone the
launch to November cause of its unfinished website. The company declared bankruptcy only six
months after its Web site had been launched and before the company could ever undertake an
IPO which it had announced.

Unique features of Boo.com

The point to be noted is that almost all these features are available in the current
ecommerce sites but all these were not so common in 1998.

Convenience/ease of using the site.

The site provided seven different languages to choose from.
Advanced search engine provided.
The model was unique from other retail site that it never gave discounts and the target
audience was the cash rich but time poor.
The site accepted 18 currencies along with all tax calculations.
360 degree view to the customers, of products displayed in the site.
An animated virtual assistant Miss.Boo to assist with the purchase of products.
Customer service line.
Loyalty points to customers who could later claim discounts based on these.
Quick delivery and return for dissatisfied customers.
Provided bandwidth for 100 million users.

The reasons for failure

The first failure was the announced of the launch date in June and later postponing it to
November.
The lag in launch date costed the company very much as many employees were already
recruited by the company and had to be provided with salary.
The company invested in many expensive advertisement modes such as Vanity Fair
magazine but postponing the dates actually neutralized its effects.
Boo.com had developed its own website and resources which was very hard to develop
and maintain. Maintenance was the major issue
$25 million dollars for advertising was too much for a startup.
The site when launched was full of errors and 40% of the customer couldnt even gain
access to the site. It even caused the computer to freeze.
The site had rolled out in 18 countries which was something that even enormous
companies would do.
Mac users couldnt even log into the site as the system was not compatible.
99% of the households in Europe and 98% of America didnt have access to high speed
internet at that point of time and as the site was loaded with too much flash graphics and
interactive features it took a long time for the site to even load.
Angry customer jammed the customer service line which irritated the waiting customers.
The representative from JP Morgan resigned and it caused a problem with the flow of
cash. This gradually led the site to start giving discounts which was not there in the
companys policies. This also caused the company to deviate from its target audience.
Deviating from the companys strategic plan definitely meant failure.
The software developed by Boo proved to be slow and expensive.
Boo never maintained any inventory (virtual inventory), if a customers basket contained
more than one item it would take a long time for all the products to reach the them as all
the products were from different places. Boo never aggregated all the products or
maintained any inventory.
The product descriptions were so tiny that none cared to read them. The scroll bar in Boo
was so different from the normal ones that customer found it very tedious to navigate.
The hierarchical menu was so difficult to handle and had to be too accurate while
selecting. There was no option to return back in case of wrong options all the process had
to be started off again.
Miss Boo the virtual assistant came into the scene every time the customer visited the site
and the customer related it back to the brick and mortar stores where a clerk kept on
nagging them for a purchase.

Fate of Boo.com

Boo had to start laying off 70 employees which went upto 450.
On May 17 2000, Boo decided to liquidate itself as it couldnt pay its outstanding bills.
On June 18 2000, Fashionmall.com purchased the remnants of Boo.
Rather than getting bogged down in taking orders and shipping goods, Boo will direct
customers to the Web sites that sell the merchandise they wish to purchase.

Learning from the case

Boo was out of business due to the lack of proper planning and control.
Budgeting, planning and execution if not taken care will prove too costly for any industry
as in the case of Boo too.
The company failed to foresee what all it lacked and just the idea of costly advertising
never reaps any good. It requires farsightedness and an idea of customers preference to
excel in any business.