SAN FRANCISCO (08/31/2000) - The axe has fallen at another European b-to-c site. LetsBuyIt.com NV, the consumer goods site that claims to reduce prices through aggregate buying, has announced plans to make 20 percent of its workforce redundant in an attempt to reduce costs.
The decision to cut 80 members of its staff of 400 will cost LetsBuyIt US$1.34 million. While chief executive Martin Coles said the cuts were "regrettable," the move is designed to show that the group is getting to grips with spiralling costs as it looks towards further fund-raising next year.
The cuts are the latest in the European Internet industry since the collapse of fashion site Boo.com, which cost 300 people their jobs, and the decision of internet incubator eSouk to slash two-thirds of its staff.
The LetsBuyIt staff affected are employed throughout the group's operations, which span 14 European countries, and the cuts are the result of the group's centralising of a number of administrative and technical processes.
The news came as LetsBuyIt announced its first set of results since its June Initial Public Offering on Germany's technology index the Neuer Markt. They showed a loss of $37.7 million for the second quarter of the year up 81 percent on the first quarter due to spending on a mammoth advertising campaign. More encouragingly membership grew quarter-on-quarter by 101 percent to 730,000 and the average value of transactions grew to $140 from $96.40.
Spending on sales and marketing was $25.8 million, up from $11.7 million, because of the group's high-profile offline ad campaigns in the U.K., Germany and Sweden. The group expects sales and marketing costs to approximately halve in the second half of the year now that the main advertising push has finished.
Reducing sales and marketing costs and controlling other expenses is crucial for LetsBuyIt. The timing of the group's IPO, just after the Spring collapse of Internet stocks, means it raised about half the amount it had hoped. The $54.4 million the group has left in the bank will last only until the middle of next year and with profitability forecast for sometime in 2003 the group must return for more funding.
Investors are rightly cautious about giving cash to b-to-c plays with high marketing budgets and apparently extravagant ways, which is why LetsBuyIt is now stressing to analysts that it can control costs and that it is a retail business first and an Internet business second.