The market for clothing in this area was viewed as very
large, so the thought was that capture of only a small part
of this market was required for Boo.com to be successful.
The view at this time on the scale of this market and the
basis for success is indicated by New Media Age (1999)
where it was described as
The $60b USD industry is dominated by Gen X’ers who
are online and according to market research in need of
knowing what is in, what is not and a way to receive
such goods quickly. If boo.com becomes known as the
place to keep up with fashion and can supply the latest
trends then there is no doubt that there is a market, a
highly profitable one at that for profits to grow from.
The growth in market was also supported by retail ana-
lysts, with Verdict predicting online shopping in the United
Kingdom to grow from £600 million in 1999 to £12.5 billion
However, New Media Age (1999) does note some
reservations about this market, saying
Clothes and trainers have a high rate of return in the
mail order/home shopping world. Twenty year olds may
be online and may have disposable income but they are
not the main market associated with mail order. To date
there is no one else doing anything similar to boo.com.
The Boo.com proposition
In their proposal to investors, the company stated that
‘their business idea is to become the world-leading
Internet-based retailer of prestigious brand leisure and
sportswear names’. They listed brands such as Polo,
Ralph Lauren, Tommy Hilfiger, Nike, Fila, Lacoste and
Adidas. The proposition involved sports and fashion
goods alongside each other. The thinking was than sports
clothing has more standardised sizes with less need for a
precise fit than designer clothing.
The owners of Boo.com wanted to develop an easy to
use experience which re-created the offline shopping
experience as far as possible. As part of the branding
strategy, an idea was developed of a virtual salesperson,
initially named Jenny and later Miss Boo. She would guide
users through the site and give helpful tips. When select-
ing products, users could drag them on to models, zoom
in and rotate them in 3D to visualise them from different
angles. The technology to achieve this was built from
scratch along with the stock control and distribution soft-
ware. A large investment was required in technology with
several suppliers being replaced before launch, which was
6 months later than promised to investors, largely due to
problems with implementing the technology.
Clothing the mannequin and populating the catalogue
was also an expensive challenge. For 2000, about $6 mil-
lion was spent on content about spring/summer
fashionwear. It cost $200 to photograph each product,
representing a monthly cost of more than $500,000.
Although the user experience of Boo.com is often criti-
cised for its speed, it does seem to have had that wow
factor that influenced investors. Analyst Nik Margolis, writ-
ing in New Media Age (1999), illustrates this by saying:
What I saw at boo.com is simply the most clever web
experience I have seen in quite a while. The presenta-
tion of products and content are both imaginative and
offer an experience. Sure everything loads up fast in an
office but I was assured by those at boo.com that they
will keep to a limit of 8 seconds for a page to down-
load. Eight seconds is not great but the question is will
it be worth waiting for?
Of course, today, the majority of European users have
broadband, but in the late 1990s the majority were on dial-
up and had to download the software to view products.
Communicating the Boo.com proposition
Early plans referred to extensive ‘high-impact’ marketing
campaigns on TV and in newspapers. Public relations
were important in leveraging the novelty of the concept
and human side of the business – Leander was previously
a professional model and had formerly been Malmsten’s
partner. This PR was initially focused within the fashion
and sportswear trade and then rolled out to publications
likely to be read by the target audience. The success of
this PR initiative can be judged by the 350,000 e-mail pre-
registrations who wanted to be notified of launch. For the
launch Malmsten et al. (2001) explains that ‘with a market-
ing and PR spend of only $22.4 million we had managed
to create a worldwide brand’.
To help create the values of the Boo.com brand, Boom
a lavish online fashion magazine, was created, which
required substantial staff for different language versions.
The magazine wasn’t a catalogue which directly sup-
ported sales, rather it was a publishing venture competing
with established fashion titles. For existing customers the
Look Book, a 44-page print catalogue was produced
which showcased different products each month.
The challenges of building a global brand in months
The challenges of creating a global brand in months are
illustrated well by Malmsten et al. (2001). After an initial
round of funding, including investment from JP Morgan,
LMVH Investment and the Benetton family, which gener-
ated around $9 million, the founders planned towards
launch by identifying thousands of individual tasks, many of
which needed to be completed by staff yet to be recruited.
These tasks were divided into twenty-seven areas of
responsibility familiar to many organisations including office
infrastructure, logistics, product information, pricing, front-
CHAPTER 3 · THE INTERNET MACRO-ENVIRONMENT
end applications, call centres, packaging, suppliers,
designing logos, advertising/PR, legal issues, and recruit-
ment. At its zenith, Boo.com had 350 staff, with over one
hundred in London and new offices in Munich, New York,
Paris and Stockholm. Initially, Boo.com was available in UK
English, US English, German, Swedish, Danish and Finnish
with localised versions for France, Spain and Italy added
after launch. The web site was tailored for individual coun-
tries using the local language and currency and also local
prices. Orders were fulfilled and shipped out of one of two
warehouses: one in Louisville, Kentucky and the other in
Cologne, Germany. This side of the business was relatively
successful with on-time delivery rates approaching
Boo possessed classic channel conflicts. Initially, it was
difficult getting fashion and sports brands to offer their
products through Boo.com. Manufacturers already had a
well-established distribution network through large high-
street sports and fashion retailers and many smaller
retailers. If clothing brands permitted Boo.com to sell their
clothes online at discounted prices, then this would conflict
with retailers’ interests and would also portray the brands in
a negative light if their goods were in an online ‘bargain
bucket’. A further pricing issue is where local or zone pric-
ing in different markets exists, for example lower prices
often exist in the US than Europe and there are variations in
different European countries.
Making the business case to investors
Today it seems incredible that investors were confident
enough to invest $130 million in the company and that at
the high point the company was valued at $390 million.
Yet much of this investment was based on the vision of
the founders to be a global brand and achieve ‘first-mover
advantage’. Although there were naturally revenue projec-
tions, these were not always based on an accurate
detailed analysis of market potential. Immediately before
launch, Malmsten et al. (2001) explains a meeting with
would-be investor Pequot Capital, represented by Larry
Lenihan who had made successful investments in AOL
and Yahoo! The Boo.com management team were able to
provide revenue forecasts, but were unable to answer fun-
damental questions for modelling the potential of the
business, such as ‘How many visitors are you aiming for?
What kind of conversion rate are you aiming for? How
much does each customer have to spend? What’s your
customer acquisition cost. And what’s your payback time
on customer acquisition cost?’ When these figures were
obtained, the analyst found them to be ‘far-fetched’ and
reputedly ended the meeting with the words, ‘I’m not
interested. Sorry for my bluntness, but I think you’re going
to be out of business by Christmas’.
When the site launched on 3 November 1999, around
50,000 unique visitors were achieved on the first day, but
only 4 in 1000 placed orders (a 0.25% conversion rate),
showing the importance of modelling conversion rate
accurately in modelling business potential. This low con-
version rate was also symptomatic of problems with
technology. It also gave rise to negative PR. One reviewer
explained how he waited:
‘Eighty-one minutes to pay too much money for a pair
of shoes that I still have to wait a week to get?’
These rates did improve as problems were ironed out – by
the end of the week 228,848 visits had resulted in 609
orders with a value of $64,000. In the 6 weeks from launch,
sales of $353,000 were made and conversion rates had
more than doubled to 0.98% before Christmas. However, a
relaunch was required within 6 months to cut download
times and to introduce a ‘low-bandwidth version’ for users
using dial-up connections. This led to conversion rates of
nearly 3% on sales promotion. Sales results were disap-
pointing in some regions, with US sales accounting for
20% compared to the planned 40%.
The management team felt that further substantial
investment was required to grow the business from a
presence in 18 countries and 22 brands in November to
31 countries and 40 brands the following spring. Turnover
was forecast to rise from $100 million in 2000/01 to $1350
million by 2003/4, which would be driven by $102.3 million
in marketing in 2003/4. Profit was forecast to be $51.9
million by 2003/4.
The end of Boo.com
The end of Boo.com came on 18 May 2000, when
investor funds could not be raised to meet the spiralling
marketing, technology and wage bills.
Source: Prepared by Dave Chaffey from original sources including
Malmsten et al. (2001) and New Media Age (1999)
CASE STUDY 3
Which strategic marketing assumptions and deci-
sions arguably made Boo.com’s failure inevitable?
Contrast these with other dot-com era survivors
that are still in business, for example,
Lastminute.com, Egg.com and Firebox.com.
Using the framework of the marketing mix, appraise
the marketing tactics of Boo.com in the areas of
product, pricing, place, promotion, process, people
and physical evidence.
In many ways, the vision of Boo’s founders were
‘ideas before their time’. Give examples of e-retail
techniques used to create an engaging online cus-
tomer experience which Boo adopted that are now
CHAPTER 3 · THE INTERNET MACRO-ENVIRONMENT
Environmental scanning and analysis of the macro-environment are necessary in
order that a company can respond to environmental changes and act on legal and
ethical constraints on its activities.
Social factors include variation in usage of the Internet while ethical issues include
the need to safeguard consumer privacy and security of details. Privacy issues include
collection and dissemination of customer information, cookies and the use of direct
e-mail. Marketers must act within current law, reassure customers about their privacy
and explain the benefits of collection of personal information.
Rapid variation in technology requires constant monitoring of adoption of the tech-
nology by customers and competitors and appropriate responses.
Economic factors considered in this chapter include the regional differences in the
use of the Internet for trade. Different economic conditions in different markets are
considered in developing e-commerce budgets.
Political factors involve the role of governments in promoting e-commerce, but also
in trying to restrict it.
Legal factors to be considered by e-commerce managers include taxation, domain
name registration, copyright and data protection.
Summarise the key elements of the macro-environment that should be scanned by an
Give an example of how each of the macro-environment factors may directly drive the content
and services provided by a web site.
What actions should e-commerce managers take to safeguard consumer privacy and
Give three examples of techniques web sites can use to protect the user’s privacy.
How do governments attempt to control the adoption of the Internet?
Suggest approaches to managing technological innovation.
Essay and discussion questions
You recently started a job as e-commerce manager for a bank. Produce a checklist of all the
different legal and ethical issues that you need to check for compliance on the existing web
site of the bank.
How should the e-commerce manager monitor and respond to technological innovation?
Benchmark different approaches to achieving and reassuring customers about their
privacy and security using three or four examples for a retail sector such as travel, books, toys
Select a new Internet-access technology (such as phone, kiosks or TV) that has been
introduced in the last two years and assess whether it will become a significant method
Explain the different layers of governance of the Internet.
Summarise the macro-environment variables a company needs to monitor when operating an
Explain the purpose of environmental scanning in an e-commerce context.
Give three examples of how web sites can use techniques to protect the user’s privacy.
Explain the significance of the diffusion–adoption concept to the adoption of new
(a) consumers purchasing using technological innovations;
(b) businesses deploying technological innovations.
What action should an e-commerce manager take to ensure compliance with ethical and legal
standards of their site?
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CHAPTER 3 · THE INTERNET MACRO-ENVIRONMENT
Mobile Commerce World (www
). Source on usage of
MORI Technology Tracker (www
). Provides a sum-
mary of access to new media platforms.
New Media Age (www
). A weekly magazine reporting on the UK
new media interest. Content now available online.
New Television Strategies (www
). Sister publication to New Media
Revolution magazine (www
). A weekly magazine available for
the UK, covering a range of new media platforms.
New law development
Two of the best legal sources to stay up-to-date are:
). Portal and e-newsletter concentrating on e-commerce law.
Marketing Law (www
). Up-to-date source on all forms of law related to
In Part 2 approaches for developing an Internet marketing strat-
egy are explored. These combine traditional approaches to
strategic marketing planning with specific Internet-related
issues that need to be considered by Internet marketers. In
Chapter 4 a strategy framework is described, Chapter 5 dis-
cusses the opportunities for varying the marketing mix online
and Chapter 6 reviews strategies for online customer relation-
Internet marketing strategy
An integrated Internet marketing strategy
A generic strategic approach
Strategic goal setting
The Internet and the marketing mix
People, process and physical evidence
Relationship marketing using the Internet
Key concepts of relationship marketing
Key concepts of electronic customer relationship management
Customer lifecycle management
Approaches to implementing e-CRM
After reading this chapter, the reader should be able to:
Relate Internet marketing strategy to marketing and business
Identify opportunities and threats arising from the Internet
Evaluate alternative strategic approaches to the Internet
Questions for marketers
Key questions for marketing managers related to this chapter are:
What approaches can be used to develop Internet marketing
How does Internet marketing strategy relate to other strategy
What are the key strategic options for Internet marketing?
Links to other chapters
This chapter is related to other chapters as follows:
It builds on the evaluation of the Internet environment from
Chapters 2 and 3
Chapter 5 describes the potential for varying different elements of
the marketing mix as part of Internet marketing strategy
Chapter 6 describes customer relationship management strategies
An integrated Internet
marketing strategy 154
A generic strategic approach
Situation review w 160
Strategic goal setting g 168
Strategy formulation n 174
Strategy implementation n 204
Case study 4
Tesco.com uses the Internet to
support its diversification
Chapter at a glance
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