Lessons learned from the demise of Boo.com
Web Informant #199, 19 May 2000
Tristan Louis is an old friend. Here is his commentary on the failure of Boo.com, a high-flying Internet company he once worked for. This is taken from his TNL.net newsletter.
Boo.com's failure is not an example of why B2C eCommerce will fail; nor is it a failure of eCommerce in Europe. Rather, it is an example of why Boo failed itself. Now that the company is bankrupt, I'd like to take a look at what went right and what went wrong and what we should learn from their failure.
Boo was the first company to launch from the ground up in multiple countries from day one. While I was working for Boo, I was in charge of developing the back-end fulfillment system, a platform that handled multiple currencies, multiple languages, on-the-fly tax calculation, and integration with multiple fulfillment partners. Let me go into more details on what this means.
Multiple currencies: If you want to trade globally, you can't only offer US dollars. As a result, you need to figure out a way to handle multiple currencies ranging from dollars to pounds to liras to francs and so forth. If you are planning on doing this well, you have to peg your prices to a particular value. However, you have to realize that prices are not the same in every country and what may seem expensive in the US can be seen as cheap in other countries. This is where you have to make a decision as to whether you want to set a fixed price in the local currency or set a more dynamic prices that is affected by currency exchanges and other fluctuations. We built a system that allowed us to set a different price for each country or set a single price for all countries and have that price be translated in the proper currency based on a set exchange rate. LESSON: When dealing across multiple countries, decide early on how you want to set up your pricing scheme.
Multiple languages: First of all, forget translation software packages. They are still relatively immature and there is (at this point anyway) little hope that they will mature much beyond their current point in the near future. If you've taken any linguistics course, you know that grammatical rules can hardly be grouped for several languages. The way we worked around it at Boo was to create translated copy by hand with people who were fluent in the language. Unfortunately, another problem cropped up: British English and American English are EXTREMELY different. LESSON: Check with the locals before making anything available to the general public.
On the fly tax calculation: This one almost killed me. In the US, it's relatively easy to deal with taxation. For the most part, you are only required to pay taxes for states in which you have a physical presence. It gets tricky is when your servers are located in one area and your offices are in another. Technically, that is two locations. In the case of Boo, it got worse. For example, a sale to France was taxed three ways. Why? Quite simply because the company had offices in Paris, servers in London, and its distribution center in Cologne. However, the interesting part of the problem was that we were making a sale but not delivering a good in the UK, delivering a good but not making a sale in Germany, and making a sale and delivering a good in France. Add to that the fact that certain goods were coming from China or Taiwan and the picture got so clouded that we had to bring in tax attorneys to help us on the details. LESSON: Hard to believe, but accountants and tax attorneys should be part of your development cycle if you are developing global eCommerce apps.
Front end is not technology: One of the biggest failures at Boo was to assume that the front end was not a technology issue. Up through launch and beyond, the front-end team was first reporting to business development and then to marketing. This was a capital mistake that I kept fighting over. A web site front-end is interface design; it's not a marketing exercise. It should include people who are versed in this and not just people who know about pretty colors. LESSON: No matter how good your backend systems are, the users will only remember your front end. Fail there and you will fail, period.
There were a lot of really smart and really good people at Boo who worked very hard to put together what, to my mind, was an amazing back-end operations. In the end, though, Boo's failure was not that unexpected to anyone who had worked for or with the company. Boo.com did not fail as an eCommerce company; it failed as a company, period. The think that took it down were not eCommerce related as much as they were just plain business. Ultimately, Boo is a typical example of a lesson that many VCs are pushing these days: Management makes or breaks a company.
(The preceding is copyright © 2000 by Tristan Louis and used with his permission.)
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