Feeds

Letsbuyit.com ducks out of float

Private placement

  • alert
  • submit to reddit

Top 5 reasons to deploy VMware with Tegile

Like a bunch of boy scouts in a raft race who built their craft fastest and are now hesitating before they get onto the precarious-looking thing, Britain's dotcoms are watching everyone else before they hit the stock exchange.

The latest bank-dwelling company is Letsbuyit.com, which has gone for the old "market volatility" reasoning behind its IPO pull-out.

Only last Thursday (18 May) Letsbuyit told the press it was definitely going through with the float. Who knows what discussions took place with investors in between, but just one week later the company had changed its mind.

Fortunately it had the foresight to get its backers to co-announce they would be plugging more money into it, so delaying cash-burn, fall-over accusations.

The point to all this is that the City is a like a jealous girlfriend. One minute it becomes convinced you are the devil incarnate and won't listen to the slightest thing you say, the next you can stay out all night and you're greeted with hugs and kisses.

A lot of the dotcoms currently headed for flotation have just hit the point where the City is getting suspicious. And it's their own fault. Give even a shallow appraisal to most of these companies' setups and all you're left with is a vague confidence that they'll make money. It's less to do with the infamous dotcom bubble and a whole lot more to do with blatantly shaky business plans.

I'm in aggregates

Letsbuyit.com has an interesting business idea: it acts as a gigantic consumers' buyers' club for consumers. By banding together, punters can get better prices from suppliers. This looks like a transfer of power from manufacturer to customer. Or is it one of those disintermediation, knock out the retailer/distributor plays? Whatever there doesn't appear to be much in it for Letsbuyit (according to the FT, it runs on margins of three per cent, for chrissake).

There are plenty of offline buyers' clubs, but it takes the Internet to get something - quickly - the size of Letsbuyit.com (more than 500,000 members scattered over a clutch of European countries).

There is no such thing as Society

In Britain, in the 19th century, The Co-operative Movement was founded as a kind of a buyers' club, which turned gradually into a gigantic retail business.

But this had a social(ist) ethic, and a mutual form of organisation, which saw owned and operated by the members for the members. There was a point to it, over and beyond chasing the best deal.

Can we say the same for Letsbuyit.com? More members and more purchases will make the site's investors very rich. But how meaningful is membership of this Web site? Is there really a community of people bound by their collective desire to get bargains online?

How useful is this collective buying power, any way? It seems unlikely that a consumer buying group could ever approach the thump of, say, Wal-Mart or Dixons. Or even a Dabs.com, the £90 million t/o Web retailer, cum mail-order house.

Compare and contrast the prices for gadgets and computer gear. Dabs' everyday pricing is never far away from the best price promised by Letsbuyit. But you don't - if it's in stock - have to wait a couple of weeks, while your fellow travellers jump in, to buy the product. And it comes with free P&P. And we bet Dabs makes more than 3 per cent net margins (its reward for taking title to stock - with all the risk and overhead that entails - and acting as a retailer, as opposed to an agent operating in a cutthroat consumer space).

We're in the VC money

Letsbuyit.com is representative of many other blinkedly optimistic Web companies.

Lots of VC cash to start with, vast advertising outlays (do you have any idea how much TV advertising costs?) and a gradual build in your customer base. What happens? Your new customers start spending little bits of money, then a little bit more, then a little bit more.

But while this is going on, the company is haemorrhaging money. Everything's going fine until the accountant pops rounds (who he?) and tells you that there's no more cash left. Unless you've floated before this point, you've run out of options.

No one else in the history of business would have tried to get away with this, so why should dotcoms? The glut of pulled IPOs is less an indication of stock market volatility than smart investors realising they've missed their window of opportunity.

Reality has caught up with the Internet economy, so if your company doesn't have a solid business foundation, update your CV, ring your old "safe" colleagues and get back to the dreary nine-to-five before your wife leaves you. ®

Choosing a cloud hosting partner with confidence

More from The Register

next story
I'll be back (and forward): Hollywood's time travel tribulations
Quick, call the Time Cops to sort out this paradox!
Musicians sue UK.gov over 'zero pay' copyright fix
Everyone else in Europe compensates us - why can't you?
Megaupload overlord Kim Dotcom: The US HAS RADICALISED ME!
Now my lawyers have bailed 'cos I'm 'OFFICIALLY' BROKE
MI6 oversight report on Lee Rigby murder: US web giants offer 'safe haven for TERRORISM'
PM urged to 'prioritise issue' after Facebook hindsight find
BT said to have pulled patent-infringing boxes from DSL network
Take your license demand and stick it in your ASSIA
Right to be forgotten should apply to Google.com too: EU
And hey - no need to tell the website you've de-listed. That'll make it easier ...
prev story

Whitepapers

Designing and building an open ITOA architecture
Learn about a new IT data taxonomy defined by the four data sources of IT visibility: wire, machine, agent, and synthetic data sets.
The total economic impact of Druva inSync
Examining the ROI enterprises may realize by implementing inSync, as they look to improve backup and recovery of endpoint data in a cost-effective manner.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Business security measures using SSL
Examines the major types of threats to information security that businesses face today and the techniques for mitigating those threats.