Mix Anthea Turner, a bunch of silly, six-foot ants and a $100 million advertising budget and what do you get? Another over-hyped, over-spent dotcom, of course, just waiting to go bust.
Last week's demise of LetsBuyIt.com will come to be seen as another milestone in the great internet shake-out. The firm's TV campaign may have earned adland's equivalent of Oscars. But troupes of ants running a flagpole up a log and the mantra: 'We all get things cheaper when we buy in a group.com' left millions baffled and irritated (buy what exactly.com?), yet totally indifferent when it came to shopping on the net.
As a result, having shut up shop just four days after Christmas and scuttled for cover from creditors, this weekend LetsBuyIt's Dutch administrators are desperately trying to salvage something from the wreckage before all the money runs out. If, that is, they find any real cash in the chaos left to burn.
LetsBuyIt, of course, was what the internet was supposed to be all about. Or at least to the 'new paradigmers', the vulture capitalists and fee-hungry City share pushers, if not the rest of us naysayers with memories of Tulipmania and the South Sea Bubble.
They rated it more highly than Boo.com, the net's first big casualty when it, too, ran out of cash last June. More than Jungle.com, which sold out in September, as credit to dotcoms from suppliers started to dry up before the Christmas season, and even more than eToys, which also pulled the plug in Europe last week after a disappointing Christmas, LetsBuyIt was going to redefine the 'shopping experience'.
Jungle and eToys were straightforward e-tailers of designer labels, electronic gadgets and kidstuff, using e-space to ply their trade. But LetsBuyIt stood out from the crowd. It trumpeted that most precious of things: a new 'model', a brand new way of doing business. No longer would shoppers buy alone. Instead, this 'internet aggregator' would group customers' orders to negotiate keener prices from suppliers.
During 'co-buying events' - some lasting days, some weeks - the more people signing up, the lower the price would be for anything from Obsession perfume to the latest BMW bike or Sony widescreen TV. They were the Rochdale pioneers of the net.
What's more, unlike run-of -the-mill e-tailers, LetsBuyIt would never handle the product. Instead ParcelForce shipped it straight from the manufacturer to your home - and at no extra cost, too. Sounds complicated? A bit too clever by half? Welcome to the real world. 'It was one of those untested models that sound fine in theory,' said a senior executive of one leading 'clicks and mortar' retailer, with far more UK buying power than LetsBuyIt and all its internet lookalikes combined. 'But consumers don't have all the time and patience in the world. Most want to buy now, with delivery in 48 hours.'
At its flotation, on Germany's Neuer Markt last July, LetsBuyIt had another key part of the internet dream: a fancy business plan, setting out spectacular growth. Founded in Sweden just two years ago, the firm promised to break even by mid-2002 and move strongly into profit in 2003. But take a closer look at the key assumptions underlying the projections and the dream turns to fantasy.
First, compound revenue growth was forecast at a gravity-defying 147 per cent over the first four years. After notching up sales of just £1.4 million in its first 12 months, LetsBuyIt had gullible investors believe it was going to rewrite the record books, with £460m of sales by 2003.
Second, from negative territory, gross profit margins would leap to a sustainable 25 per cent by 2002 - dizzy heights of which most retailers can but dream. 'I remember looking at the figures and thinking "you must be on drugs",' says Heidi Fitzpatrick, internet analyst with broker Lehman Bros, one of the few City scribblers to emerge with credit from an all-too familiar saga.
To any common sense observer, LetsBuyIt was in deep trouble long before it came to market. For starters, founder John Palmer - who had a background in the Australian toy trade - and his Swedish backers followed Boo.com's lead by setting up in 14 countries all at once. From the outset, with 350 staff, overheads ran ahead of reality. The loss-making Danish operation has yet to make a single kroner of sales, while in Germany - LetsBuyIt's biggest market - its business model was illegal under ancient anti-discounting laws that protect small shopkeepers.
By the summer, the firm had already blown most of the £75m it had raised from backers. Despite the recruitment of a heavyweight top team including former Nike boss John Coles, the flotation had also already been put off twice. On the last occasion, in May, the plug was pulled just a day after a juvenile marketing stunt in which Turner and her man-sized ants were barred by the old dears at the Chelsea Flower Show.
Not surprisingly, the flotation raised just £41m, less than half what the profligate business plan intended and at half the price per share. LetsBuyIt blames changed sentiment towards dotcoms for its demise: it failed because of events beyond its control.
What nonsense. The market's reaction is a logical response to irrational over-exuberance in the first place. But take a look, too, at LetsBuyIt's last results, for the quarter to end September. Sales and gross profits were up 28 per cent to £5.8m and £570,000 respectively.
But what's this buried in marketing, advertising and promotions? Just £930,000 of subsidy - more than its profits - for free deliveries which anyone else would deduct from the gross margin. As Lehman's Fitzpatrick puts its: 'If you're losing money every time you ship a product, you're in trouble.'
And then came Christmas. For 1999's festive season, LetsBuyIt barely had an offering. The accountants are now investigating how it fared over Christmas 2000, but the omens are not good. The 'trouble' with Christmas is that people want presents now, not in two weeks or a month. So out of the window went the model, and LetsBuyIt started to buy stock directly. By the end of September it already had £1.6m worth on its books. How much unsold - or returned - stock it now has remains to be seen.
By October, LetsBuyIt still had to sell another £17m worth of goods to make its £30m flotation forecast. Last week's abrupt resignation and departure of Coles and his team suggests things went badly wrong. Last week, the internet's bulletin boards were abuzz with tales of how LetsBuyIt ruined many a consumer's Christmas.
Before it shut down, the firm's website boasted well over a million members. But less than a fifth ever bought anything. Many of the newer recruits were just signing up for the free £5 Amazon books voucher. At the end, however, LetsBuyIt was not even delivering those.
