Letsbuyit.com’s management has resigned as the company’s financial woes worsen.
The management board of European eRetailer Letsbuyit.com resigned on Wednesday, as the company’s position gets bleaker and bleaker. The company, which is listed on the Neuer Markt, registered in the Netherlands and based in the UK, is currently looking into its financial situation to see whether it can continue trading.
Letsbuyit is a ‘co-shopping’ website, which cuts prices if groups of consumers sign up to purchase an item. Many expected this innovative business model to be successful. Unfortunately, it arrived on the scene too late to get the chance to prove it. The company floated on the Neuer Markt in July 2000, after Internet stocks had started to decline. It only managed to raise E66 million at flotation, against a monthly burn rate of E8 million. This was never going to be sustainable without further investment.
Whilst it has managed to cut its burn rate to round E6 million, the company is estimated to need about E70 million to reach profit and is believed only to have around E15 million left. It has already filed for creditor protection in the Netherlands, giving it four weeks’ exemption from its debts; the question now is whether anyone will be willing to put up the extra cash to see the company into profit or whether it will have to close down.
So far, things aren’t looking good for Letsbuyit’s search. The company has stopped taking new orders, although it has said it will still fulfill orders that have already been placed. And whilst it has been in talks with firms including Great Universal Stores, it has said that no deals are likely soon.
If the company is to continue, it may be forced into a major scaling back of operations. At the moment, although it has operations throughout Europe, it only generates substantial revenues from the UK, Germany and Scandinavia. Sites outside these markets are likely to be the first casualties. But even this option will require additional investment for the company to make its projected breakeven date of 2002. The management team’s departure may imply they are less than confident this search for more cash will be a success.
