Letsbuyit.com has filed for bankruptcy after failing to find a buyer.
Letsbuyit.com has finally stopped trading. The eRetailer’s future has been in jeopardy for a while, as it has come closer and closer to using up all its cash reserves. It suspended operations two weeks ago to investigate its financial situation and try to find a buyer, but it now looks like this hunt was in vain. The Dutch courts will now have to consider the application, but the company, which is listed on the Neuer Markt, registered in the Netherlands and based in the UK, is almost certain to be wound up.
Letsbuyit was a ‘co-shopping’ website, which cut prices if groups of consumers signed up to purchase an item. Many expected this innovative business model to be successful. Unfortunately, Letsbuyit was too late in arriving to get the chance to prove it. The company only floated in July 2000, after the Internet stock crash had begun and 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.
Had the company continued trading, although it had managed to reduce its burn rate to around E6 million, it would still have needed about E70 million to reach profit. But its cash reserves at the beginning of the year were below E15 million. Without a partner willing to make the commitment, even though Norway’s Coshopper and France’s Dealpartners both expressed interest, the company had no alternative but to close down.
So what will happen now? A possible outcome is a Boo.com-style ending, with assets being sold off and a competitor buying the brand name and web address. However, while the site’s technology is likely to find a buyer, it is less innovative than Boo’s. Similarly, the company is much less high profile than Boo, without such a well-recognized image. Since Boo’s brand only fetched half a million dollars, the chances of Letsbuyit shareholders seeing their money again have got to be low.
