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Electronics retailer 800.com was caught short when the economy weakened and its cash was tied up in holiday preparations.
It seemed that all the dot-com pure-play retailers who are going to die have done so. There hadn’t been a high-profile demise in some time-until February. That’s when 4-year-old 800.com folded and sold assets and its domain name to Circuit City.
The same problems that did in 800.com’s brethren last year continue to operate: Building a brand and achieving economies are tough. “The business was working, they did a great job with customer service and they were making a profit on every transaction,” says Gerry Langeler, general partner of Portland, Ore.-based OVP Venture Partners, a major investor. “It was a classic case of the model working but the scale didn’t’ arrive before the cash ran out.”
President and CEO Greg Drew says the economic downturn and the dramatic halt of orders following Sept. 11 turned out to be deadly. “We were running things really tight because we were heading towards profitability,” he says. But preparations for the holiday season-inventory, marketing and catalog-printing-were already tying up cash. And when the downturn hit, the company did not have the reserves to stay in business.
As of March 1, 800.com’s traffic went to CircuitCity.com. The companies did not disclose terms of the deal.
800.com’s strategy was to provide high-level, specialty customer service and to be among the few authorized online sellers of brand-name electronics. It was backed by substantial financing: It had raised $121 million since its November 1997 inception.
But it still faced large multi-channel retailers whose higher volume and national brands give them the lead in product selection and low pricing. “Strong multi-channel brands can compete on more than just price. A lot of that has to do with money and a lot has to do with expertise,” says Duif Calvin, vice president of global retail practice at Scient Inc. “It turns out you need to know more about selling than you do about the Internet to have a successful online business.”