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Summary:

Swedish entrepreneur Ernst Malmsten presided over the rise and fall of Boo.com, Europe’s most notorious dot-com failure. Now he’s ready to try his hand at online retail once again — but what has he learned from more than a decade in the wilderness?

Boo.com sticker

Boo.com screenshotIt’s been 11 years since online fashion retailer Boo.com became Europe’s most famous dot-com casualty, burning through mountains of cash in a few months and flaming out in spectacular style. On the Internet, 11 years is more than a lifetime — but perhaps a lifetime is how long it takes for anyone involved in such a shambles to be rehabilitated and resurrected.

Take Ernst Malmsten, one of the site’s co-founders. This week, the Swedish-born, London-based entrepreneur is launching a new attempt at selling fashion online: LaraBohinc.com, a website spun off from the well-regarded luxury label he runs. He’s actually been behind the wheel at Bohinc for five or six years (designer Lara Bohinc is an old friend) but it’s only now that he’s prepared to dip his toe back in the water of online retail.

It’s no surprise, really, that it’s taken such a long time. Boo.com was Europe’s equivalent of Webvan or Pets.com: a huge and explosive online brand that grew rapidly on the back of $188 million in VC money but crashed and burned after offering the service for a mere six months. Launched in 1999, Boo followed Amazon’s model: aggressive, venture-funded expansion that would pay back when the company hit it big. Except it never did.

In some ways, the site was simply ahead of its time;  back then, few people were comfortable purchasing fashion items on the Web, but the cultural attitude toward buying clothes online is hugely different today, producing successes for existing retailers like Gap, as well as new, specific names like Zappos or top-end bargain site Gilt Groupe. In other ways, however, Boo was a prime example of the blindness of the first boom. The site’s user experience was terrible and complex, and while its Flash-heavy interface worked fine for the handful of people with access to fast broadband, the majority of potential customers were still using dial-up access and struggled to get onto the site at all.

And then there was the insane burn rate. The company spent vast amounts on logistical systems that didn’t work. An astonishing number of customers used the company’s policy of offering free returns (no doubt because they were still coming to terms with buying clothes online) but each one was extra cost that Boo had to bear. And the attempt to launch as a global brand put huge pressure on the site to scale up in a matter of weeks. Even today, the company is used as shorthand for a spectacularly stupid failure, a name spoken around London’s thriving Internet industry as an inside joke.

So what did Malmsten learn from his epic failure?

At first, it seems, perhaps not much at all. The PR guff accompanying Bohinc’s launch wears Malmsten’s name like a badge, calling him “a pioneer of fashion e-commerce”. You get the sense that he’s looking for some kind of redemption — arguing that the only thing wrong with Boo was the timing.

“At last, the vision we had a decade ago has become reality. Today everyone is online and does not think twice about buying products worldwide… when we were getting started in the late 90s, e-commerce technology was expensive, cutting-edge and risky. Now it is proven, totally reliable and costs next to nothing.”

It’s certainly more than a little disconcerting to hear Malmsten talk about the market like this at the same time Henry Blodget is loudly proclaiming that “there is no new tech bubble”. It’s the sort of combination that should be enough to give anyone shivers.

Still, Malmsten is not entirely blind to Boo’s lessons. Lara Bohinc’s site was apparently built with just $16,000, and he seems keen to curb the excessive spending of his previous life. And he’s also concerned about the prospects of a bubble. Talking to the Financial Times, he warned that people should not take the current crop of Internet valuations too seriously. They’re “crazy” and “fuelled by greed,” he said. Perhaps he has learned from the mistakes of the past, after all.

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  1. To be fair, Zappos has since come along and validated the return policy. Having said that, the rest of the reasons behind the spectacular failure seem pretty much spot on!

    1. As far I know Zappos has *roughly* similar return rates to Boo (return rates are pretty standard across the industry), but they seem to have two advantages: first, they planned for it — and then, secondly, lasted long enough for Amazon to step in and buy them!

  2. Henrik Berglund Tuesday, April 12, 2011

    Free returns works fine for Zappos today, but when Boo.com launched they expected 10% returns, and got 30% = an untested large scale hypotheses that turned out to be pretty costly.

    For those interested in a brief recap of the epic #fail that was Boo.com, take a look at this Customer Development presentation in which Boo.com is used as an example of what NOT to do! http://slidesha.re/cimBsq

  3. In the UK, we still use boo.com as THE failure of the dot.com bubble (I graduated 2 years ago).

    I saw Malmsten on BBC Newsnight a few days ago and I couldn’t believe it. How has this guy got a job after what he did? Burning money on celebrity parties and a very expensive image like it was never ending. Then being surprised when it ran out.

    “Too early”? give me a break. He likes the high life, and is trying to get there again (hence the raised profile he is currently enjoying).

    Boo.com was an epic failure because of its 3 founders. They say it was too early, but look at Amazon. Founded before Boo, and still going very strongly.

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