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*** Please Read through the following case about Boo.com. An

*** Please Read through the following case about Boo.com. An

*** Please Read through the following case about Boo.com. AnswerQuestions at end. Need at least 1 page single spaced or 2 pages doublespaced.“Unless we raise $20 million by midnight, boo.com is dead”, saidboo.com CEO Ernst Malmsten, on May 18th 2000. Half the investment wasraised, but this was too little, too late, and at midnight, less than ayear after its launch, Boo.com closed. The headlines in the FinancialTimes, 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 aLondon head office, which was founded by three Swedish entrepreneurs,Ernst Malmsten, Kajsa Leander and Patrik Hedelin. Malmsten and Leanderhad previous business experience in publishing where they created aspecialist publisher and had also created an online bookstore,bokus.com, which in 1997 became the world’s third largest booke-retailer behind Amazon and Barnes & Noble. They becamemillionaires when they sold the company in 1998. At boo.com, they werejoined by Patrik Hedelin who was also the financial director at bokus,and at the time they were perceived as experienced European Internetentrepreneurs by the investors who backed them in their new venture.The vision for Boo.com was for it to become the world’s first onlineglobal sports retail site. It would be a European brand, but with aglobal appeal. Think of it as a sports and fashion retail version ofAmazon. At launch it would open its virtual doors in both Europe andAmerica with a view to ‘amazoning the sector’.Note though that in contrast, Amazon did not launch simultaneously inall markets. Rather it became established in the US before providinglocal European distribution through acquisition and re-branding of othere-retailers in the United Kingdom and England for example.According to Malmsten (2001), the boo brand name originated fromfilmstar ‘Bo Derek’, best known for her role in the movie ‘10’. Thedomain name ‘bo.com’ was unavailable, but adding an ‘o’, they managed toprocure 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 differentcountries and easy to remember … something that didn’t have aparticular meaning”.The audience targeted by boo.com can be characterized ‘young,well-off and fashion-conscious’ 18 to 24 year olds. The concept was thatglobally the target market would be interested in sports and fashionbrands stocked by Boo.com. The market for clothing in this area wasviewed as very large, so the thought was that capture of only a smallpart 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 forsuccess 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 andaccording to market research in need of knowing what is in, what is notand a way to receive such goods quickly. If boo.com becomes known as theplace to keep up with fashion and can supply the latest trends thenthere is no doubt that there is a market, a highly profitable one atthat for profits to grow from.”The growth in market was also supported by retail analysts, withVerdict 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 “Clothesand trainers have a high rate of return in the mail order/home shoppingworld. Twenty year olds may be online and may have disposable income butthey are not the main market associated with mail order. To date thereis no one else doing anything similar to boo.com”.In their proposal to investors, the company stated that ‘theirbusiness idea is to become the world leading Internet-based retailer ofprestigious brand leisure and sportswear names’. They listed brands suchas 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 withless need for a precise fit that designer clothing.The owners of boo.com wanted to develop an easy to use experiencewhich re-created the offline shopping experience as far as possible. Aspart of the branding strategy, an idea was developed of a virtualsalesperson, initially named Jenny and later Miss Boo. She would guideusers through the site and give helpful tips. When selecting products,users could drag them on to models, zoom in and rotate them in 3D tovisualize them from different angles. The technology to achieve this wasbuilt from scratch along with the stock control and distributionsoftware. A large investment was required in technology with severalsuppliers being replaced before launch which was 6 months later thanpromised to investors, largely due to problems with implementing thetechnology. Clothing the mannequin and populating the catalogue was alsoan expensive challenge. For 2000, about $6million was spent on contentabout spring/summer fashion ware. It cost $200 to photograph eachproduct, representing a monthly cost of more than $500,000.Although the user experience of boo.com is often criticized for itsspeed, it does seem to have had that wow factor that influencedinvestors. Analyst Nik Margolis writing in New Media Age (1999)illustrates this by saying: “What I saw at boo.com is simply the mostclever web experience I have seen in quite a while. The presentation ofproducts and content are both imaginative and offer an experience. Sureeverything loads up fast in an office but I was assured by those atboo.com that they will keep to a limit of 8 seconds for a page todownload. Eight seconds is not great but the question is will it beworth waiting for?”Of course, today, the majority of European users have broadband, butin the late 1990s the majority was on dial-up and had to download thesoftware to view products. Early plans referred to extensive “highimpact” marketing campaigns on TV and newspapers. Public relations wereimportant in leveraging the novelty of the concept and human side of thebusiness –Leander was previously a professional model and had formerlybeen Malmsten’s partner.This PR was initially focused within the fashion and sportswear tradeand then rolled out to publications likely to be read by the targetaudience. The success of this PR initiative can be judged by the 350,000e-mail pre-registrations who wanted to be notified of launch. For thelaunch Malmsten (2001) explains that “with a marketing and PR spend ofonly $22.4 million we had managed to create a worldwide brand”.To help create the values of the Boo.com brand, Boom a lavish onlinefashion magazine was created which required substantial staff fordifferent language versions. The magazine wasn’t a catalogue whichdirectly supported sales; rather it was a publishing venture competingwith 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 illustratedwell by Malmsten et al. (2001). After an initial round of funding,including investment from the JP Morgan, LMVH Investment and theBenetton family, which generated around $9 million, the foundersplanned towards launch by identifying thousands of individual tasks,many of which needed to be completed by staff yet to be recruited. Thesetasks were divided into twenty-seven areas of responsibility familiarto many organizations including office infrastructure, logistics,product information, pricing, front-end applications, call centers,packaging, suppliers, designing logos, advertising/PR, legal issues, andrecruitment.At its zenith, boo.com had 350 staff, with over one hundred in Londonand new offices in, Munich, New York, Paris and Stockholm. Initiallyboo.com was available in UK English, US English, German, Swedish, Danishand Finnish with localized versions for France, Spain and Italy addedafter launch. The web site was tailored for individual countries usingthe local language and currency and also local prices. Orders werefulfilled and shipped out of one of two warehouses: one in Louisville,Kentucky and the other in Cologne, Germany. This side of the businesswas relatively successful with on-time delivery rates approaching 100%achieved.Boo possessed classic channel conflicts. Initially, it was difficultgetting fashion and sports brands to offer their products throughboo.com. Manufacturers already had a well-established distributionnetwork through large high street sports and fashion retailers and manysmaller retailers.If clothing brands permitted boo.com to sell their clothes online atdiscounted prices, then this would conflict with retailers interests andwould also portray the brands in a negative light if their goods werein an online ‘bargain bucket’. A further pricing issue is where local orzone pricing in different markets exists, for example lower pricesoften exist in the US than Europe and there are variations in differentEuropean countries.Today it seems incredible that investors were confident enough toinvest $130 million in the company and at the high point, the companywas valued at $390 million. Yet much of this investment was based on thevision of the founders to be a global brand and achieve ‘first moveradvantage’. Although there were naturally revenue projections, thesewere not always based on an accurate detailed analysis of marketpotential.Immediately before launch, Malmsten (2001) explains a meeting withwould be investor Pequot Capital, represented by Larry Lenihan who hadmade successful investments in AOL and Yahoo! The boo.com managementteam were able to provide revenue forecasts, but when unable to answerfundamental questions for modeling the potential of the business, suchas “How many visitors are you aiming for?” “What kind of conversion rateare you aiming for? How much does each customer have to spend? What’syour customer acquisition cost. And what’s your payback time on customeracquisition cost?” When these figures were obtained, the analyst foundthem 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 goingto be out of business by Christmas.”When the site launched on 3rd November 1999, around 50,000 uniquevisitors were achieved on the first day, but there were only 4 in 1000placed orders (a 0.25% conversion rate). Showing the importance ofmodeling conversion rate accurately in modeling business potential. Thislow 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 Istill going to have to wait a week to get?” These rates did improve asproblems were ironed out – by the week 228,848 visits had resulted in609 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 tocut download times and to introduce a ‘low-bandwidth version’ for usersusing dial-up connections. This led to conversion rates of nearly 3% onsales promotion.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 wasrequired to grow the business from a presence in 18 countries and 22brands in November to 31 countries and 40 brands the following spring.Turnover was forecast to rise from $100 million in 2000/01 to $1350million by 2003/4 which would be driven by $102.3 million in marketingin 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 couldnot be raised to meet the spiraling marketing, technology and wagebills.Questions 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 tojustify your critique and proposed ideas. Not all terms need to beused. 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, credibilityDid 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?

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