Net retailing shakeout hits Boo.com

High-end clothing site lays off workers, attributes cutbacks to seasonal trends

But analysts are saying that the entire online retailing space is ripe for a shakedown.

The Internet retailer shakeout continues. Officials at high-end clothier Boo.com confirmed Wednesday that the company was laying off employees and revamping its Web site -- the latest online retailer to feel the pinch after the holidays.

A company spokesperson would not confirm the number of layoffs, but published reports put the figure at about 10 percent of the clothing store's workforce.

Boo.com -- which is backed by luxury goods conglomerate LVMH Moet Hennessy Louis Vuitton's chairman, Bernard Arnault -- launched in November amid much industry buzz. The store debuted with sites for multiple countries, using different languages and currencies, as well as high-tech bells and whistles such as 3-D views.

The spokesperson, who asked not to be named, said the company would be combining its "Boom Magazine" content division into the rest of the Web site.

That reorganisation will result in some of the layoffs. The rest are coming from the customer service division, the spokesperson said. Some of those jobs were temporary help hired for the holiday season.

But while Boo claims that the cutbacks are a reflection of the seasonal nature of retailing, analysts are saying that the entire online retailing space is ripe for a shakedown.

While online holiday sales beat many expectations -- Jupiter Communications put the total figure at $7bn (£4.43bn)-- things haven't been quite so rosy after the holidays.

Sites, including Beyond.com and Value America, have announced cutbacks and restructuring moves. Pets.com recently reduced the amount of money it said it expects to earn from a public stock offering.

Even such high-flying retailers as eToys are feeling the pinch. The company, which research firm Media Metrix said was the third-most-visited e-commerce site during the holiday, has seen its stock price fall to close to its 52-week low.

"We're definitely starting to see a rationalization," said Joe Sawyer, an analyst at Forrester Research. "It seems like it should be a great time to be in online retail, but there are a lot of difficulties with the business models that have been obscured. Those are coming to light now with earnings announcements.

"A lot of people are finding they just can't stay in business."

Analysts are particularly concerned about companies in crowded categories, where sites are basically reduced to competing on price or marketing to get the consumer's attention.

"Look at the beauty space," said Jupiter Communications analyst Ken Cassar. "There's very, very little differentiation of brands. They all sell the same products, and there's no difference except for pricing."

Stores in those categories have had to spend heavily on marketing, Cassar said, but may not be getting the yield from those ads that they would have liked.

"There was so much 'dotcom' advertising that it was a major challenge for anyone to rise above the din," he said.

So what happens now? Mergers, layoffs and acquisitions, according to industry watchers.

The shakeout could be accelerated as offline retailers take steps to make their presences felt online.

"The increasing adaptability of the leading traditional retailers in the online arena will lead to even more competition in an already brutally competitive market -- a trend that will likely hasten a shake-out and consolidation in the online retailing sector," Merrill Lynch analyst Henry Blodget wrote in a recent report.

Some of those bricks-and-mortar firms may simply buy their way onto the Web, taking over a struggling online retailer.

Cassar pointed to KBkids.com as a successful example of the practice. The company was formed last May when Consolidated Stores, owner of the KB Toys chain, bought out BrainPlay.com.

"KB came in and immediately changed the brand. They were able to acquire all that expertise and functionality, and use their brand to push the site," he said.

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