More online retailers face the music

The dot-com carnage continues apace, with online beauty retailer Eve.com announcing that it is shutting its doors and two other e-commerce ventures saying they're resorting to layoffs in an effort to stem their losses.

          The dot-com carnage continues apace, with online beauty retailer Eve.com announcing that it is shutting its doors and two other e-commerce ventures saying they're resorting to layoffs in an effort to stem their losses.

          Stamps.com, an online postage services company in Santa Monica, California, says 240 workers are being let go in a move that slashes its workforce by 40%. The job cuts follow the resignations earlier this month of four top executives, including the company's chairman, president and chief financial officer.

          Meanwhile, Drugstore.com in Bellevue, Washington, discloses that 10% of its 600 or so employees are being laid off. It reports a pro forma net loss of $US33.3 million for the third quarter and warns that it expects a similar loss in the fourth quarter and a deficit of up to $US110 million during all of next year.

          In its shutdown announcement, San Francisco-based Eve.com says it was forced to go out of business because it hasn't been able to achieve profitability selling cosmetics online in the face of stiff competition. The company plans to immediately lay off most of its 164 employees, leaving just "a minimal staff of personnel" to wind down the operations.

          "After a careful and thorough review of the company's business, industry dynamics and all available options, it was determined that fundamental industry issues related to product supply would preclude the company from achieving an acceptable level of profitable growth in cosmetics alone," Eve.com says in its statement.

          The online retailer, which was launched in June 1999, adds that it "lacked adequate capital to reach sufficient operating scale" from a revenue standpoint, despite having "delivered orders profitably for ... five consecutive months."

          In a notice posted on its website, Eve.com says items ordered before 11am Eastern Standard Time last Friday will be shipped to customers as long as the products are in stock. Any back-ordered items won't be delivered, and customers won't be charged for those items.

          Stamps.com has almost $US300 million in cash reserves, according to a statement by Marvin Runyon, a former US postmaster general who took over as acting chairman of the company after this month's management resignations. But he adds that the layoffs "will strengthen our ability to attain our profitability goals."

          Drugstore.com spokeswoman Kelly McGinnis says the layoffs taking place at that company were necessary because of the more skeptical view that venture-capital investors are taking toward online retailers. "Given the dramatic change in the investment market, we needed to look at how to manage our cash-burn, and we decided to make [the necessary] changes," she says.

          According to a survey by InsightExpress, the recent problems at online pharmacies such as Drugstore.com and PlanetRx.com may be more than just a case of dot-com stock devaluation. Shoppers are staying away from online drugstores in droves, Insight Express says: 93% of the people who responded to the survey reported that they have never made a purchase from an internet-based pharmacy.

          But Matt Stamski, an analyst at Gomez Advisors says the problems are being felt by online retailers in general. "The bloom is definitely off the e-tailers' rose," he says. "Each and every e-tailer, especially pure-plays, are being called to profitability by their backers and investors."'

          It's particularly difficult for niche-oriented online retailers such as Eve.com and Drugstore.com to compete for attention and sales, Stamski adds.

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