March 2, 2009, 12:00 AM packs up its U.K. operation

After investing four years and millions of dollars, has shut down its e-commerce site in the U.K. The company expected to use the site as a springboard into Europe, but the economic downturn forced it to pull back from that strategy.

After investing four years and millions of dollars, has shut down its e-commerce site in the United Kingdom. The company expected to use the U.K. site as a springboard into Europe, but the economic downturn forced eBags to pull back from that strategy, says Peter Cobb, cofounder and senior vice president.

The closing resulted in the company eliminating the jobs of its 10 employees in the Cambridge facility where the U.K. operation was based since it was set up in October 2004. Those employees handled merchandising, product photography, marketing and fulfillment for, the U.K. site. Such other tasks as web design and information were handled from the company’s base in Denver, Cobb says.

While Cobb says became the leading U.K. online retailer of handbags, luggage, backpacks and laptop cases, it never broke even. Among the reasons he cites are the expense of establishing the eBags brand with heavy paid search spending, the unfavorable exchange rate for most of the time the U.K. unit was operated and generally higher costs for facilities and personnel in Britain.

Had the economy been better, Cobb says eBags probably would have maintained its U.K. site, although not expanded into Europe at this time because of other priorities. He says it remains a challenge to expand into Europe, despite the efforts of the European Union to create a single market.

“As you roll out country by country, you do need translation, you need customer service in the appropriate language, you need to file taxes in individual countries, and you probably want keyword purchases for each language,” Cobb says. “Each country becomes its own little startup business.”

In the face of the economic crisis, eBags also has laid off 26 employees in the U.S. for a total of 36 jobs eliminated, or 30% of its work force. Cobb says eBags learned during the falloff in travel and luggage purchases following the September 11, 2001, terrorist attacks, that cutting expenses quickly and deeply may be necessary to stay in business. “It’s really, really unfortunate, but you do have to eliminate any chance you’re not going to survive,” he says.

Meanwhile, Cobb says, eBags, No. 90 in the Internet Retailer Top 500 Guide, expects to have a profitable year, and is benefiting in some ways from the recession. “We have brands coming to us saying a major big box retailer canceled an order or filed for Chapter 11 and we have bags we have to move. Let’s talk about a promotion we can run or an e-mail we can be in,” he says. “They need to get out of some inventory and we love demonstrating value.”

Cobb is speaking at the Internet Retailer Conference & Exhibition, June 15-18 in Boston, in a session entitled Rich media: Who needs it?.

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