Co-buying Web site Letsbuyit.com is to close its UK operations and lay off nearly half its staff after announcing a loss of £4.6m for the three months to 30 June.
The company announced the closure of operations in the UK -- which it had seen as a key market alongside Germany, France and Sweden -- when it released its financial results for the first half the year on Friday. Sixty of the company's 140 employees will be laid off, including some workers in France. So far this year, Letsbuyit.com has made a loss of £16m.
Sales in the second quarter of 2001 were significantly lower at £2.2m, compared to £4.5m for the same period in 2000. Letsbuyit.com claims, however, that the two figures are not directly comparable because during the first half of this year it was not trading until 26 February. This is because the company was in some turmoil back at the turn of the year, when its shares were suspended as it attempted to defer debt payments -- only six months after its July 2000 flotation.
Its shares, which peaked at 6.45 euros the day it floated, are now changing hands for around 0.18 euros on the Dutch stock market.
The business proposition behind Letsbuyit.com is that consumers get a better deal if they buy collectively. By letting customers make joint purchases through it, Letsbuyit.com promised significant savings. To illustrate the advantages of cooperating to potential customers, Letsbuyit.com's adverts were based on groups of ants working together.
Things began to go wrong when the company's IPO, which took place after Internet shares began to drop in value, only raised half as much money as expected.
In an attempt to cut costs, Letsbuyit has slashed spending on sales and marketing. It has only spent 5.3m euros on these areas so far this year, compared to 71.2m euros in the first six months of 2000. "Our difficult cash position has severely restricted our ability to buy attractive products for sale. For this reason, no extensive marketing campaigns were launched during the first half 2001," said John Palmer, chief executive.
The worst may not be over for the company, though. In its financial statement it predicts that a lack of cash reserves will limit its ability to buy in products for its users to club together and buy. "This will have a negative impact on the company's net revenues, which are expected to be considerably lower in the third quarter of 2001, compared to earlier projections," warns Letsbuyit.com.
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