Letsbuyit wins €4m investment
Letsbuyit, the cash-strapped dotcom buyers' club, has secured an additional €4m from an investor. This will help it on the way to achieving expected "sustained profitability...before the end of 2002".
The investor, Global Emerging Markets New York, will shell out the money in four equal slugs, starting October 30, 2001. The next lot is paid on the listing of the shares in the Neuer Markt. The rest is paid at monthly intervals.
One has to admire the tenacity of the Letsbuyit management team. The company survived a brush with death earlier this year; but it is now alive and kicking. And it continues to secure investment.
Letsbuyit conducted its IPO in July 2000, several months after the dotcom crash. As a private company it was well-funded by VCs; as a publicly listed company it had too little cash in the bank.
Since the end of 2000, it has been cutbacks, management changes and re-orgs all the way. The company has modified its original flawed business model (in its original format the online buyers club could not produce attractive enough discounts). In its current guise, Letsbuyit operates now as an agency for manufacturerers and other retailers, such as the German giant KarstadtQuelle.
This will see turnover fall, and potential profits fall; at the same time operating expenses, working capital requirements, and risk, are greatly reduced.
Letsbuyit may have been a prisoner of circumstances in reaching this decision - with a poorer credit rating than leading retailers, the company obtains smaller limits at worse terms than its competitors.
As an agency, Letsbuyit can offer lower prices than it could as a principal, as it leverages off partners' buying power.
And as a agency, Letsbuyit is an attractive proposition to vendors, with 1.3 million members in Germany, the UK and Sweden. It is questionable how many of these are active buyers, but the point is that Letsbuyit has succeeded in building a standalone Net brand, especially for discounted electronics goods. As such it looks a low-cost route to market for bigger players. ®