Boo.com's Failure

Introduction

The year 2000 was a turbulent time for the Internet economy, but the failure ofthe clothing e-tailer Boo.com, added to fears about the stability and viability ofexisting and future on-line retailers. If we examine the history of the originalBoo.com, its financial situation, marketing and management strategies, andassess the reasons for its downfall, we can learn several valuable lessons.

Boo.com was launched 3rd November 1999, with approximately $125million(76 million pounds) of funding provided by investors such as Benetton andBernard Arnault, chairman of LVMH, Europe’s largest luxury goods group. Ithad not only become the most heavily funded Internet start-up in Europe, buthad also become the most high profile. All eyes were on Boo.

The launch was delayed by six months, which according to various sourceswere due to technological problems. According to the ‘Financial Times’, therewas a huge spending on consultancy fees, to get the website launched asquickly as possible. In addition, they state that $6million was spent on fashionware, which had to be discounted as it was no longer fashionable by the timethe site was eventually launched (Financial Times. 18th May 2000). When thesite did eventually arrive, customers found the shopping experiencefrustrating. They were greeted by an on-line virtual shopping assistant ‘MissBoo’. She did not succeed in helping visitors with the purchasing experience.Instead Boo.com visitors were greeted with slow browsing, poor navigationand irritating technology. This lost potential customers and gained Boo a badreputation.

What are the causes that lead to Boo.com's failure? Well, let's check it out.

1. Poor Web Design and Usability

ZDNet, a reputed critic it the IT industry, created a report of their experienceof using the Boo.com site. They describe an example search for productinformation, which took five user actions, including escaping past annoyinganimated graphics, to reach the desired location. “With products zooming allaround the page, customers practically have to play target practice in orderselect the product they want” (ZDNet, 29th November 1999). In the webdesign industry, there is a “three-click rule” for site design, which simplymeans that users should not need to click more than three times to find theinformation they seek. A browsing experience should be made pleasurable,simple and quick to use, and should not be hindered by the overuse oftechnology.

In addition to poor web design practice, there were several reports of“computer text” appearing in the users browser instead of graphics, andcomplaints that customers were unable to purchase products. The ‘FinancialTimes reported that one customer had been advised by Boo to “limit theamount of transactions they made, to three per twenty minutes” (FinancialTimes, 4th November 1999). Clearly this kind of approach would not entice acustomer to shop at this site again, and could discourage potential customersfrom shopping over the Internet at all.Although there is no information available regarding Boo.com’s site testingmethods, it is clear from the customers poor on-line shopping experiences,that sufficient testing was not undertaken, nor were their circumstances takeninto account. The average user’s Internet connection does not have theavailable bandwidth that is needed for 3-D viewing. E-businesses shouldensure that their sites are fully tested and refined before promoting them;otherwise they risk losing customers and revenue. Having in-houseprofessionals test the site would be inconclusive as they already have priorknowledge of the objectives of the site. The test subjects should incorporateactual audience members and include some professionals, as well as thosewho know little about trading and those who have never traded on-line.

2. Bad Marketing

It was not only the site navigation and viewing experience that discouragedshoppers from buying from Boo.com. Boo marketed it self as a premiumsports, urban street wear and fashion retailer, stocking quality products for thefashion conscious young individual. However, with premium products cameexpensive charges. Traditionally, customers are attracted to buying over theInternet by cheaper pricing. Where clothing is concerned it is particularlyimportant, as customers like to see, feel and try on items before buying.Boo.com’s clever technology enabled shoppers to view items in 3-D andaccording to ZDNet gave a distinct visual feel of the products (ZDNet, 29thNovember 1999), but they did not account for a key internet buying driver –lower prices. Studies sponsored by KPMG, Hewlett-Packard and VNUPublications – the publisher of ‘Computing’, show the three main reasons forweb purchases in the UK as (in order if importance), “Ease/Convenience”,“Better Prices” and ‘Speed of Process’. Results for France and Germanywere similar (Computing, 30th November 2000). Boo.com fulfilled none of thecriteria. One wonders what market research they conducted and if so, howthey applied it. The ‘Financial Times’ reasoned that the brands involved inBoo.com did not wish to offer discounts, as it would devalue their brand(Financial Times, 4th November 1999). Perhaps if the site itself had given agood user experience, “Ease/Convenience” and “Speed of Process” wouldhave won the customers hearts.

3. Bad Planning

It would seem that bad planning in several areas of Boo.com’s strategy waskey to its downfall. Its Swedish founders Kajsa Leander and Ernst Malmstenwere too ambitious in their business plan. Instead of starting small and thenexpanding slowly, Boo wanted to dominate the market immediately. The‘Financial Times’ describes the management team as “visionary and hip”, but quite rightly asks the question whether any traditional shopkeeper would planto simultaneously launch a new chain of stores in eighteen countries acrosstwo continents (Financial Times, 19th May 2000). The answer is of course“No”. Boo’s founders clearly did not have “bricks and mortar” retailingexperience, although they had the experience of starting and runningBookus.com, which according to ‘Investor’s Week’, was the third-largestonline bookstore in the world (Investor’s Week, 26th May 2000).

4. Human Resource Management Errors

Boo.com attempted to create a perfect environment for its employees, withplenty of staffing including a call centre of eighty people, and approximatelyfour hundred staff in all, a number which proved to be excessive andexpensive (Financial Times, 18th May 2000). While extra employees ensurean efficient running of a company, and sufficient call centre staff is valuable toproviding excellent customer service, there should be careful human resourcemanagement. It appears that Boo.com had followed its pattern of operatingon an overly grand scale, by over recruiting at the outset, rather than seeinghow well the business faired.

5. Investor Concerns

There had been improvements to the website and it was starting to gainsignificant revenues (Net sales from February to April were $1.1million andgross sales in April $500,000), comparing well with other e-tailers (FinancialTimes, 20th May 2000). Nevertheless, would it have been sensible to investmore money at this stage? Boo.com was forced into liquidation when it’sinvestors refused to inject any more cash into the business. It had alreadyspent $380million. Fashionmall.com, a US fashion portal, bought itstechnology infrastructure, domain and brand. Boo.com would be used as a portal to introduce shoppers to retailers, and would continue to use the wellknownvirtual assistant ‘Miss Boo'.

6. Business Model and Brand Failures

Ben Narasin, Fashionmall’s CEO, suggested that it was only Boo.com’sbusiness model which had failed, and not its brand (Financial Times, 2nd June2000). Surely, this is not the case. On the one hand Boo did succeed increating a “hip and trendy” image suitable for attracting young shoppers, buton the other hand, the performance of the site gave the brand a reputation ofbeing customer unfriendly. To elaborate, let us examine the Boo theme asdiscussed in articles such as ‘Investor’s Week’. The site was used to create avirtual world called ‘Planet Boo’ which had ‘Club Boo’, ‘Miss Boo’ the virtualassistant and customer service staff called the ‘Boo crew’. There was also‘Boom magazine’ (Investor’s Week, 26th May 2000). Metaphors such asshopping trolleys are commonly used in sites as good way of assisting thecustomer with navigation and to take the technicality away from the user’sinteraction with the site. ‘Miss Boo’ provides a good metaphor. To some, butnot all customers, the trendy ‘Miss Boo’ may be appealing, but ‘Investor’sWeek’ suggests that the ‘Boo’ culture was overplayed and in fact drovecustomers away (Investor’s Week, 26th May 2000).

It was the the inability to keep the customer engaged in the buying process,due to poor design, and slow performance that caused damage. Negativemedia exposure brought on by the delay of the launch of the site, and badpublicity regarding excessive spending and non-profitability were detrimentalto the brand.

KPMG said that Boo spent $25million of its initial $125million on marketing,and according to Dr Therese Torris, a senior researcher with ForresterResearch this money was spent on expensive advertising through TV, radioand fashion magazines (BizReport, 19th May 2000). The publication‘Marketing’ writes that Boo.com burnt cash on advertising and brandpromotion but says that Boo’s “initial success was due to it’s expertise increating brand awareness (Marketing, 25th May 2000). Unquestionably, goodbranding is about understanding what stimulates customers and about risingto their expectations. At the basic level, successful branding should evokethoughts of quality and of a business that delivers on promise. Boo.com wasnot able to do this. Therefore, it would appear, that whilst it is important tospend on advertising and to research, using the most effective methods, ifyour business is not sound and does not satisfy the customer, then thisinvestment is effectively wasted.