operations, the anticlimax that followed the months of anticipation was
inevitable. However, within weeks the business was already being over-
whelmed with problems leading to restructuring plans that included frantic
efforts at cost-cutting that led to employee dismissals.
The business mistakes that led to the demise of boo.com are discussed in
the following sections.Error no. 1: poor business planning At its time of launching, boo.com
was the largest e-retail funded company in Europe, yet the company had a
poor business plan and an ill-defined business model. The company also
lacked strategic direction and made its future earnings projections based on
assumptions that e-retailing was a gold mine with strong growth potentials.
Boo.com was started as an e-retailer that sold fashion goods online.
However, as a company it had an unclear corporate image. For example, the
company spent millions of dollars on advertisements and promotions in a bid
to create market awareness. However it was not clear if the advertising
message was to project boo.com as a fashion brand, or boo.com as an online
sales channel, or boo.com as a corporate brand or all of the above.
Also, the company had no identified competitive leverage that would have
given it an edge in its market. It was unclear whether boo.com was positioned
as a niche player with highly differentiated products and services, or whether
its competitive strategy would focus on cost advantage, thereby providing
‘value for money’ goods. The competitive strategy of boo.com seemed to be
stuck in the middle between high-end differentiation and low-end cost effi-
ciency. The company failed to realize that operating in a virtual environment
meant creating a distinct advantage for customers that was better than what
could be obtained offline. Boo.com also did not recognize that the internet
required more than appealing products and service parity. Online retailing
entailed an exceptional positioning and boo.com lacked this element.
In addition, the business model of boo.com featured a poor marketing plan
with unfeasible strategies. Aspects of the marketing planning such as
consumer segmentation and targeting were ill-defined. The targeted
consumer group was identified as young fashion consumers between the ages
of 18 and 30. However, no further apparent efforts were made to determine
the key characteristics of this group; the influencing factors of their consump-
tion patterns; and their attitudes towards online shopping. The company
assumed that since the consumers were young, they would shop online
because the internet was a new medium that had a strong appeal to young
consumers. Business investment decisions are however not made by assump-
tion but by concrete and viable market indicators.
In addition, boo.com aimed to reach a global consumer market but the lack
of the definition of the competitive positioning of boo.com made it difficult
to determine if the target market was the global high-end fashion consumers
or the mass-market consumers of fashion goods. These two groups of288
luxury fashion branding