I recently received a note from Amazon.com (from which I last bought something, oh, about seven years ago). It was a personal note, from Jeff Bezos himself:
“For almost a year, we’ve been working on a new effort that we’re finally ready to show you. We’re proud to introduce our new Apparel and Accessories store with over 400 major clothing brands (including Gap, Old Navy, Nord-strom, Lands’ End, Target, Eddie Bauer, Foot Locker, and many more).”
The small irony of Amazon entering the apparel market for me was that I was nearly finished reading the rags-to-riches-to-rags tale of UK-based apparel and sports e-tailer boo.com, written by its hubristic Swedish co-founder Ernst Malmsten.
Amazon was one of many that took the same route as boo: it traded hard (in both senses) on its first-mover advantage, sacrificed early profits for growth, had a spectacular burn-rate, wrestled with technological and logistical demons, and boasted media-savvy fo-unders who could talk up a storm. The difference was, Amazon came through, whereas boo was a spectacular failure. Why?
“Of course,” says Jeff, “none of this would be possible without our many apparel store partners (we’re thankful to have such an amazing group of companies working with us).”
Signing up well-known quality brands was crucial to boo’s campaign.
In the end, the autopsy of boo reveals it was riddled with diseased business practices. Malmsten and his ex-partner, ex-model Kajsa Leander, made many classic business, project management and IT management mistakes.
They failed to put in place and rigorously test their technology base and business infrastructure; they expanded too quickly; expensively built the technology platform themselves, hiring internal IT, design and other teams rather than outsource. Ed Zander, Sun’s head, popped into their offices at one point after they bought a 1.3 million pound sterling E-10000 Starfire server.
They became alternately obsessed with the global business plan and minutiae such as the look and attitude of online shop-girl Miss Boo; went for cutting edge, expensive 3D photography and set ridiculous deadlines; settled for exponential growth over profits and even revenues; and the senior management team was hopelessly inexperienced to run a global enterprise.
Such was the way of the dot-com boom that they got as far as they did, boasting hundreds of staff in offices around the northern half of the globe and the backing — until the final hurdle — of JP Morgan and big-name fashion outfits like LVMH. They were too ambitious, planning to have a global operation hit the ground running. Planning a massive public share offering while trying to get the business off the ground. Planning, planning, planning.
Not only did Malmsten promise real-time links to suppliers, so that what was for sale on the site existed in a warehouse somewhere, but five-day delivery, shipping anywhere in Europe or North America free, and transactions in local currencies and six languages. An operation like boo needed to launch in both US and Europe, for sure, but a methodical, milestone-by-milestone approach would have minimised the crunches.
As it was, boo.com launched six months late, a killer in dot-com terms. Its founders burned through $US130 million in 18 months. And here’s one to really take note of: they only planned to turn a profit, of about $US50 million, in 2003/4. If they had survived until today, the IT press would probably still be writing about their latest financial top-up and how Kajsa’s latest child is doing.
Malmsten is bitter about media attacks when things start to go wrong — like complaints about a slow, complex site and user glitches; fatal problems in e-tailing — yet acknowledges that getting publicity so easily was only guaranteeing a backlash when it inevitably went wrong. Malmsten, it should be remembered, made the cover of Fortune as the CEO of one of the world’s “coolest” companies.
Arguably, they did some things right. They promoted talented staff, though they heaped on the work. Giving people their head is guaranteed to either produce stars or duds.
Malmsten would doubtless argue that he replaced the duds as they failed. People gained valuable skills, in running a dot-com as opposed to a bricks-and-mortar operation, in leadership, in project management, technology management, supply chain management.
The last two resulted in an order fulfillment platform, Dolphin, that the company subsequently tried to sell to other e-tailers. Unsuccessfully. (Boo’s software was eventually bought for $US375,000. It cost perhaps $US58 million to develop.) And they realised — too late — that technology was vital to the success of the operation, in contrast to the endless hours they spent attracting funding, branding, marketing and PR, and schmoozing with the glitterati at grandiose events.
As the head of still-in-business online travel site Ebookers.com said at the time: “They were young people who got into the business with a great plan who couldn’t deliver.”
Jeff Bezos goes on the tell me (and me alone; if you got one it was a cc: from my email) what beta-customers have bought in the past week and that I had a $US30 coupon if I bought $US50 of gear.
Thanks, but these days I try to buy local.