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Transcript of Boo.com
Boo.com was an online retail company founded in 1998 by Ernst Malmsten, Kajsa Leander and Patrik Hedelin.
The vision of the company was that it would be the first online global sports retailer selling brands such as Polo, Ralph Lauren, Tommy Hilfiger, Nike, Fila, Lacoste and Adidas.
Its aim was to compete with industry rivals such as Amazon and Barnes + Noble in the online retail market.
Solution to deal with distribution issues
Solution to increase investors confidence
Channels Distribution Issues
Chaffey, D 2014, Boo.com case study – a classic example of failed ecommerce strategy, Smart Insight, June 19 2014, viewed 4 November 2015, <http://www.smartinsights.com/digital-marketing-strategy/online-marketing-mix/boo-com-case-study-a-classic-example-of-failed-ebusiness-strategy/>
Gillan, G & Wilson, R 2003, Strategic Marketing Planning second edition, Routledge, Milton Park Abingdon
Park, C, Jaworski, B & MacInnis D 1986, Strategic brand concept-image management, JSTOR, Journal of Marketing, <https://msbfile03.usc.edu/digitalmeasures/macinnis/intellcont/strategic_brand86-1.pdf>
Stout, L 2002, The Investor Confidence Game, Cornell Law Facility Publications, Vol 68 No 2, <http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=2315&context=facpub>
Cannon, J & Homburg C 1998, Buyer-Supplier reltionships and Customer Firm Costs, The
Pennsylvania State University, <http://isbm.smeal.psu.edu/isbm_smeal_psu_edu/library/working-paper-articles/1998-working-papers/13-1998-buyer-supplier-relationships.pdf>
Could a better marketing planning have affected the outcome? How?
Issues around distribution and channel conflict were found to exist for Boo.com
As noted by Chaffey (2014) "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 smaller retailers"
Retailers also disliked Boo.com for selling goods at lower prices as it affected there own brand image
Well established companies such as Nike, Ralph Lauren and others did not think that discounting there products benefited there brand equity and image as they are viewed by consumers to be expensive luxury status products
Inability to Persuade Investors
During its lifetime there was a failure to receive more investment due to lack of clear and transparent information that would allow for more informed decision to invest by current or potential shareholders
A general lack of confidence was present in potential investors
As noted by Chaffey (2014) "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"
Reasons for Failure
1) Lack of investment due to unclear forecast sales figures which led to lack of confidence for investors resulting in a shortage of capital to continue operations
2) Channel distribution issues affecting the flow of goods due to manufacturers own established networks along with disagreements to discount products due to them being seen as a luxury product and status symbol
3)Ambitious marketing plan
Brand Image and positioning
As noted by Park, Jaworski and MacInnes (1986, p.136) "A brand with multiple concepts therefore provides inconsistent guidelines for positioning"
In the case of brands that Boo.com sold having discounted prices would lead to inconsistencies in brand positing for the well known labels that they sold.
As noted by Stout (2002, p.410) "The rational expectations investor assumes that other participants in the market, including corporate managers and securities professionals like brokers and mutual fund managers, are also cool, calculating and purely self-interested actors".
Such characteristic traits of the investment proposal were not found with Boo.com promotion to potential investors
Literature to support the importance of investor confidence
Changes that would of made for a better marketing strategy for Boo.com can be:
1) Changes to the distribution of goods
2) More in-depth plausible forecast figures that are objective not ambiguous
3) Building a local brand before going global
Managing relationships with suppliers is seen as fundamental to lower costs, even though Boo.com could not lower the price of the luxury brands they sold perhaps having a better relationship with suppliers would of allowed for greater flexibility in terms of pricing.
As noted Cannon & Homburg (1998, p. 1) "significant opportunities for cost savings may be realized by identifying suppliers that behave in ways that help lower a customer firm’s costs—and by more effectively managing relationships with suppliers"
Low investment confidence for further investment for Boo.com was caused mainly due to a lack of detail in projected sales that investors could then feel more confident about in investing in the company.
With vast resources needed by company representatives to ensure financial investment poor and lacking in detail forecasts lead to a drop in confidence and skepticism for potential investment.
Boo.com simply could not make a plausible business case to investors when questioned more in dept around profit measures.
Building a Local Brand First
The fundamental first step in strategic planning is to understand the organisation's scope and boundaries. By building a local brand before going global boo.com could have been more successful. The company would have had an early indication on issues that resulted in a negative reputation with a smaller impact on the business than that of a global scale. Boo.com would have also been able to do research in regards to conversion rates and rectify issues to maximise profits before entering a global market.
ONE OF THE MOST NOTABLE ONLINE
FAILURES OF THE DOT.COM AGE
-Make informed decisions when choosing who to hire
-Understand the importance of timing when entering a market
-Use a cost effective marketing strategies
-Test all areas of the website before launching
-Don't use overly optimistic figures when predicting future profitability and customer base
-Don't spread too thin
-Don't try to expand into too many markets and locations at once
-Build local brand awareness then move to global.
Lessons Learned from
-Following an extremely aggressive growth plan
-Launching into too many markets at one time
-Obsession with brand identity
-Allowing marketing team to overrule business decisions
-Using technology that most internet users at the time did not have
-Slow and unpleasant website experience for customers
-Too ahead of their time with technology required by users
-Lack of functionality
What would you have done differently if you were the founder of Boo.com?
Are there any other factors you think contributed to the failure of Boo.com?