A Dot.com Story from Concept to Catastrophe
Before reading boo hoo, which details the rise and fall of Boo.com, you probably thought you already knew the story. It's only when you start to read it that you realise that the story is quite different. It is really a tale of ignorance, extravagance and arrogance, writes Gordon MacMillan.
From the outside it appeared to be a story of three Swedish twenty-somethings who previously ran and sold an internet bookshop in Sweden. They went on to to raise around £120m from a range of high-profile investors including LVMH chief Bernard Arnault and Benetton to launch a global online sportswear-come-fashion-come-streetwear store. It was at the time, and still is, quite an amazing achievement.
The book is written by Boo founder Ernst Malmsten, a 6ft 5inch Elvis Costello look-a-like who has a thing for Nordic poetry.
Poetry was Ernst's background. He had been a critic in Sweden and went on to organise a highly successful international festival of Nordic poetry in New York, which was backed by the likes of Nokia and Carlsberg. Quite an achievement for a 23-year-old. He organised the festival with his former kindergarten friend, later girlfriend and finally business partner Kajsa Leander, an ex-model.
Together with a banker associate they went on to dream up the idea of Boo. Unlike many rival internet firms springing up in 1998 and 1999, Boo would be global. It would not have operations in one country but in 18. It would not employ 40 or 50 people, but 400. From the start, it must have seemed impressive.
The investors they meet either go one of two ways. They love them or they think that it will never work. There are, it turns out, easily more of the latter than the former, but there are still enough to raise the £120m Boo would get through in its short life.
From the start, Boo massively over-anticipated the level of online sales it thought it could achieve and this affected everything else about the company, as all of its financial projects were based on wildly ambitious sales targets.
Then there is the question of what Boo was and what it was going to be. There was always confusion and the argument runs right the way through the book. Leagas Delaney, its first ad agency, thought it was a sportswear store. It fired the agency. A designer it works with tells Boo, "I don't understand your positioning. Is this going to be more of a fashion company or a sports company?" As Ernst helpfully tells him half-heartedly to do a little of both, it is clear that the founders don't really understand either. Enter BMP DDB -- agency number two. BMP thinks Boo is about geek chic. Finally, but with little enthusiasm, it is agreed that Boo was a sports and streetwear store on the net.
What becomes radically clear throughout the book is that Boo didn't know the answers to the difficult questions. When people ask them tough questions these people are quickly dismissed as not understanding the Boo brand. One US venture capitalist asks why is it trying to launch in 18 countries when most can't do it in one. Ernst is outraged -- it is an absurd question. He complains that the man has probably not visited Europe recently. The question of why launch in 18 countries at once is never answered. It is only in the dying hours as the company is pared back that a decision is taken to serve 18 countries from one.
What becomes really clear is that none of the senior management really knows what they are doing. Like so much of what was going on at that time, they were, like many others, making it up as they went along.
The extravagance and waste was everywhere. There are the hotels from the Soho Grand in New York to the Ritz Carlton in San Francisco; there are the restaurants such as Nobu; the $10,000 spent on suits for a photo opportunity and then, of course, there is the Lear Jet. Ernst complains that after the Lear Jet, Concorde seems cramped. Well, I guess it would, wouldn't it?
More than $500,000 alone goes on head-hunting fees as Boo hired staff on salaries that make others at the time look paltry. Its head of IT got a £100,000 package, a car and a flat in London; the head of merchandising in the US got a $300,000 package. There was the staff of its online magazine Boom, which also had teams in every country. Around $1.5m spent on photographing products for the site, the £1,700 a day spent paying an interim chief financial officer for weeks on end. These people burned and wasted millions with the greatest of ease. Oh and of course, there are the dozen Gurkas hired for security reasons?
Then there is the arrogance and there is a lot of it. As Boo is about to launch, JFK's words about the space programme are ringing in Ernst's ears; he tells us after a government e-summit he is now advising Tony Blair; on a visit to Nobu, the supermodel Elle MacPherson "studiously avoids" his gaze. Giselle, the Brazilian supermodel, makes an appearance also. He tells PR company Hill & Knowlton that the story does not need to be sold "as it was good enough to sell itself", reducing his account director to tears. He, of course, completely reverses his opinion as HK's efforts pay off with interest from Vogue and other such titles. When Goldman Sachs says Boo might want to scale back its ambitions, Ernst rails and says, "Goldman Sachs has gone nuts. They want us to do our IPO in Stockholm."
Boo finally launched six months later in November 1999. It lasted half a year and when it closed it had achieved sales of $638,500 for its first quarter. Trading was been much slower than many expected. Its much-delayed launch left piles of unsold autumn/winter stock and it was also hit by its failure to sign distribution agreements with Nike and Adidas.
boo hoo is an engaging read and you will find yourself whizzing through the book. This, however, is mostly because it is full of gags. These are mostly unintentional, but Ernst just keeps them coming. You are sure to love the one where Boo's HR director is escorted out by Ernst backed by six Gurkas. As that illustrates so well, what Boo was really turned out to be was a farce. However, it is one that is a must-read if you are at all interested in reading about what made the dotcom boom tick and then explode.
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