Letsbuyit no longer illegal in Germany?
More it sells, more it loses
Troubled buyers clube Letsbuyit.com has embraced news of the repeal of two strict German laws regarding price discounting. The two laws - the Discount Law and Free Gifts Act, according to Letsbuyit - will be eliminated from the middle of next year to help build the country's e-commerce industry.
The laws were created in the 1930s to help protect consumers and consumer choice and banned discounts of more than three per cent (with some exceptions, like very cheap giveaways). However as European markets have grown and changed, the laws have become out of date and actually damaged consumer interests.
Of course, such a law is anathema to Letsbuyit, which relies on bulk-buying discounts to function. Despite this, the company claims it is still doing great business there - 50 per cent of sales apparently. From next year though, the company will be able to offer the same kind of discounts that it does elsewhere in Europe.
An interesting side show to all this also occurred about a month ago, when a German judge decided that Letsbuyit was "excessively alluring" because it had turned a "transaction into a game". An interesting insight into the German mentality. So even though the company may soon legally be able to run its business how it wishes - will Germans trust it? Will too large a discount scare off Hans?
Not that any of this matters much though. We have always maintained that Letsbuyit's business is flawed and we stand by that. German law change or no, the company is in serious financial straits, just recently making it clear that it needed a "strategic partner" to give it £50 million to get through to 2002 - when it reckons it will become profitable.
The company also slashed its workforce by 20 per cent in September, despite increased sales. Its gross profit margins leapt and its made revenue of £4.4 million. Unfortunately, it also had operating costs of £26 million. ®