*** Please Read through the following case about Boo.com. Answer
Questions at end. Need at least 1 page single spaced or 2 pages double
“Unless we raise $20 million by midnight, boo.com is dead”, said
boo.com CEO Ernst Malmsten, on May 18th 2000. Half the investment was
raised, but this was too little, too late, and at midnight, less than a
year after its launch, Boo.com closed. The headlines in the Financial
Times, the next day read: “Boo.com collapses as Investors refuse funds.
Online Sports retailer becomes Europe’s first big Internet casualty”.
Boo.com was a European company founded in 1998 and operating out of a
London head office, which was founded by three Swedish entrepreneurs,
Ernst Malmsten, Kajsa Leander and Patrik Hedelin. Malmsten and Leander
had previous business experience in publishing where they created a
specialist publisher and had also created an online bookstore,
bokus.com, which in 1997 became the world’s third largest book
e-retailer behind Amazon and Barnes & Noble. They became
millionaires when they sold the company in 1998. At boo.com, they were
joined by Patrik Hedelin who was also the financial director at bokus,
and at the time they were perceived as experienced European Internet
entrepreneurs by the investors who backed them in their new venture.
The vision for Boo.com was for it to become the world’s first online
global sports retail site. It would be a European brand, but with a
global appeal. Think of it as a sports and fashion retail version of
Amazon. At launch it would open its virtual doors in both Europe and
America with a view to ‘amazoning the sector’.
Note though that in contrast, Amazon did not launch simultaneously in
all markets. Rather it became established in the US before providing
local European distribution through acquisition and re-branding of other
e-retailers in the United Kingdom and England for example.
According to Malmsten (2001), the boo brand name originated from
filmstar ‘Bo Derek’, best known for her role in the movie ‘10’. The
domain name ‘bo.com’ was unavailable, but adding an ‘o’, they managed to
procure the domain ‘boo.com’ for $2,500 from a domain name dealer.
According to Rob Talbot, director of marketing for Boo.com, Boo were
“looking for a name that was easy to spell across all the different
countries and easy to remember ... something that didn't have a
The audience targeted by boo.com can be characterized ‘young,
well-off and fashion-conscious’ 18 to 24 year olds. The concept was that
globally the target market would be interested in sports and fashion
brands stocked by Boo.com. The market for clothing in this area was
viewed as very large, so the thought was that capture of only a small
part of this market was required for boo.com to be successful.
The view at this time on the scale of this market and the basis for
success is indicated by New Media Age (1999) where it was described as
“The $60b USD industry is dominated by Gen X'ers who are online and
according to market research in need of knowing what is in, what is not
and a way to receive such goods quickly. If boo.com becomes known as the
place to keep up with fashion and can supply the latest trends then
there is no doubt that there is a market, a highly profitable one at
that for profits to grow from.”
The growth in market was also supported by retail analysts, with
Verdict predicting online shopping in the United Kingdom to grow from
£600 million in 1999 to £12.5 billion in 2005. However, New Media Age
(2005) does note some reservations about this market, saying “Clothes
and trainers have a high rate of return in the mail order/home shopping
world. Twenty year olds may be online and may have disposable income but
they are not the main market associated with mail order. To date there
is no one else doing anything similar to boo.com”.
In their proposal to investors, the company stated that ‘their
business idea is to become the world leading Internet-based retailer of
prestigious brand leisure and sportswear names’. They listed brands such
as Polo Ralph Lauren, Tommy Hilfiger, Nike, Fila, Lacoste and Adidas.
The proposition involved sports and fashion goods alongside each other.
The thinking was that sports clothing has more standardized sizes with
less need for a precise fit that designer clothing.
The owners of boo.com wanted to develop an easy to use experience
which re-created the offline shopping experience as far as possible. As
part of the branding strategy, an idea was developed of a virtual
salesperson, initially named Jenny and later Miss Boo. She would guide
users through the site and give helpful tips. When selecting products,
users could drag them on to models, zoom in and rotate them in 3D to
visualize them from different angles. The technology to achieve this was
built from scratch along with the stock control and distribution
software. A large investment was required in technology with several
suppliers being replaced before launch which was 6 months later than
promised to investors, largely due to problems with implementing the
technology. Clothing the mannequin and populating the catalogue was also
an expensive challenge. For 2000, about $6million was spent on content
about spring/summer fashion ware. It cost $200 to photograph each
product, representing a monthly cost of more than $500,000.
Although the user experience of boo.com is often criticized for its
speed, it does seem to have had that wow factor that influenced
investors. Analyst Nik Margolis writing in New Media Age (1999)
illustrates this by saying: “What I saw at boo.com is simply the most
clever web experience I have seen in quite a while. The presentation of
products and content are both imaginative and offer an experience. Sure
everything loads up fast in an office but I was assured by those at
boo.com that they will keep to a limit of 8 seconds for a page to
download. Eight seconds is not great but the question is will it be
worth waiting for?”
Of course, today, the majority of European users have broadband, but
in the late 1990s the majority was on dial-up and had to download the
software to view products. Early plans referred to extensive “high
impact” marketing campaigns on TV and newspapers. Public relations were
important in leveraging the novelty of the concept and human side of the
business –Leander was previously a professional model and had formerly
been Malmsten’s partner.
This PR was initially focused within the fashion and sportswear trade
and then rolled out to publications likely to be read by the target
audience. The success of this PR initiative can be judged by the 350,000
e-mail pre-registrations who wanted to be notified of launch. For the
launch Malmsten (2001) explains that “with a marketing and PR spend of
only $22.4 million we had managed to create a worldwide brand”.
To help create the values of the Boo.com brand, Boom a lavish online
fashion magazine was created which required substantial staff for
different language versions. The magazine wasn’t a catalogue which
directly supported sales; rather it was a publishing venture competing
with established fashion titles.
For existing customers the Look Book, a 44 page print catalogue was produced which showcased different products each month.
The challenges of creating a global brand in months are illustrated
well by Malmsten et al. (2001). After an initial round of funding,
including investment from the JP Morgan, LMVH Investment and the
Benetton family, which generated around $9 million, the founders
planned towards launch by identifying thousands of individual tasks,
many of which needed to be completed by staff yet to be recruited. These
tasks were divided into twenty-seven areas of responsibility familiar
to many organizations including office infrastructure, logistics,
product information, pricing, front-end applications, call centers,
packaging, suppliers, designing logos, advertising/PR, legal issues, and
At its zenith, boo.com had 350 staff, with over one hundred in London
and new offices in, Munich, New York, Paris and Stockholm. Initially
boo.com was available in UK English, US English, German, Swedish, Danish
and Finnish with localized versions for France, Spain and Italy added
after launch. The web site was tailored for individual countries using
the local language and currency and also local prices. Orders were
fulfilled and shipped out of one of two warehouses: one in Louisville,
Kentucky and the other in Cologne, Germany. This side of the business
was relatively successful with on-time delivery rates approaching 100%
Boo possessed classic channel conflicts. Initially, it was difficult
getting fashion and sports brands to offer their products through
boo.com. Manufacturers already had a well-established distribution
network through large high street sports and fashion retailers and many
If clothing brands permitted boo.com to sell their clothes online at
discounted prices, then this would conflict with retailers interests and
would also portray the brands in a negative light if their goods were
in an online ‘bargain bucket’. A further pricing issue is where local or
zone pricing in different markets exists, for example lower prices
often exist in the US than Europe and there are variations in different
Today it seems incredible that investors were confident enough to
invest $130 million in the company and at the high point, the company
was valued at $390 million. Yet much of this investment was based on the
vision of the founders to be a global brand and achieve ‘first mover
advantage’. Although there were naturally revenue projections, these
were not always based on an accurate detailed analysis of market
Immediately before launch, Malmsten (2001) explains a meeting with
would be investor Pequot Capital, represented by Larry Lenihan who had
made successful investments in AOL and Yahoo! The boo.com management
team were able to provide revenue forecasts, but when unable to answer
fundamental questions for modeling the potential of the business, such
as “How many visitors are you aiming for?” “What kind of conversion rate
are you aiming for? How much does each customer have to spend? What’s
your customer acquisition cost. And what’s your payback time on customer
acquisition cost?” When these figures were obtained, the analyst found
them to be ‘far-fetched’ and reputedly ended the meeting with the words.
“I’m not interested. Sorry for my bluntness, but I think you’re going
to be out of business by Christmas.”
When the site launched on 3rd November 1999, around 50,000 unique
visitors were achieved on the first day, but there were only 4 in 1000
placed orders (a 0.25% conversion rate). Showing the importance of
modeling conversion rate accurately in modeling business potential. This
low conversion rate was also symptomatic of problems with technology.
It also gave rise to negative PR. One reviewer explained how he waited:
“Eighty-one minutes to pay too much money for a pair of shoes that I
still going to have to wait a week to get?” These rates did improve as
problems were ironed out – by the week 228,848 visits had resulted in
609 orders with a value of $64,000. In the 6 weeks from launch, sales of
$353,000 were made and conversion rates had more than doubled to 0.98%
before Christmas. However a re-launch was required within 6 months to
cut download times and to introduce a ‘low-bandwidth version’ for users
using dial-up connections. This led to conversion rates of nearly 3% on
Sales results were disappointing in some regions with US sales accounting for 20% compared to the planned 40%.
The management team felt that further substantial investment was
required to grow the business from a presence in 18 countries and 22
brands in November to 31 countries and 40 brands the following spring.
Turnover was forecast to rise from $100 million in 2000/01 to $1350
million by 2003/4 which would be driven by $102.3 million in marketing
in 2003/4. Profit was forecast to be $51.9 million by 2003/4.
The end of boo.com came on May 18th 2000, when investor funds could
not be raised to meet the spiraling marketing, technology and wage
1. Which strategic marketing assumptions and decisions arguably made boo.com’s failure inevitable?
2. In this day and age (Year 2012), what recommendations would you make to boo.com?
*** THEORY is extremely important. Utilize the below terms to
justify your critique and proposed ideas. Not all terms need to be
used. The answer should be thorough.
Was the Purpose of the Website: Serve, Support, Sell, correctly executed? Was the domain name a good choice?
Content. Was it compelling? Did it educate, inform, have sellability, credibility
Did the content marketing use the 5 pillars? If so which ones?
Where they listening to the key performance indicators? What were the key performance indicators?