May 02, 2001, 1:44 PM — SHIPPING SOFAS AND BEDROOM sets all over the country is expensive. Better not offer your customers free delivery and returns, like Furniture.com did (before it went out of business).
There's one lesson learned.
Here's another: Stand ready to change your business model on a dime when the dollars don't flow. That's what happened to iWant.com, the former online marketplace for consumers that quickly morphed into a service provider for advertisers on the Web.
Last year CIO profiled six companies and their e-commerce business models in our Case Files series. Now we're looking back to see how they did and what we can learn from their experiences. We found both folly and wisdom in this tribe of e-business entrepreneurs.
"The psychology a year ago was very exuberant toward dotcoms and now is rife with cynicism. The truth is somewhere in between," asserts Randall Hancock, senior vice president at Mainspring, a strategy consultancy in Cambridge, Mass. "There was a tremendous amount of innovation and a tremendous amount of learning that took place over the last year."
Let's begin.
Furniture.com Made Too Many Promises It Couldn't Keep
The best-known dotcom we dug into last year was Furniture.com -- both in life and in death. Furniture is a notoriously tricky industry. But in January 2000, executives seemed unfazed; they promised Web shoppers 24-hour browsing and six- to eight-week delivery times on everything from table lamps to 10-piece bedroom ensembles.
Convincing customers to buy furniture online was the easy part. The company reported $22 million in net revenues for nine months ending September 2000 -- more than twice the total 1999 net revenues -- and attracted 1 million users a month.
But with the increase in usage came a dramatic jump in customer dissatisfaction. Customer complaints filed with the Better Business Bureau (BBB) in Worcester, Mass., leapt from one in 1999 to 149 in 2000, steep even by dotcom standards, says Barbara Sinnott, president of the Central New England BBB. Most brick-and-mortar companies get three to four complaints a year, tops. The leading complaint: delivery problems, followed by product quality and bill disputes. (Attempts to reach Furniture.com CEO Andrew Brooks were unsuccessful.)
While executives built the Furniture.com brand like nobody's business, they neglected to create the infrastructure to support it. The company failed to factor in the logistics and costs involved in shipping such a bulky commodity cross-country and had no way to track orders.
"Right down to the very last day, they still couldn't make a decision on an information tracking platform," says Ian Nickerson, president of Global Logistics Solutions of Dennis, Mass., one of Furniture.com's regional logistics partners. "We invested a lot of money in technology to track orders so that they could let customers know where their delivery was in the system. But we ended up having to do everything manually."
Furniture.com also created a cancellation policy no furniture company could afford. Contrary to the no-return policy we had reported, customers could cancel orders right until delivery day. With six-week waits turning into six-month delays, a third of all orders were cancelled. Local logistics companies had warehouses of unwanted furniture, according to Nickerson. The result: storage costs that surpassed the already astronomical shipping costss Furniture.com footed for customers.
"They didn't understand the supply chain dynamics well enough, and they didn't understand fundamental operations strategy," says David Pyke, a professor at Dartmouth's Amos Tuck School of Business Administration who specializes in e-commerce and supply chain management. "Free shipping, free returns, low prices, lots of variety! How can you go wrong? Well, the customer might be happy -- if the promises were fulfilled -- but the company can't make money like that."
Several rounds of layoffs and $27 million in makeshift funding furnished in June 2000 didn't get Furniture.com any closer to profitability. The online retailer, which launched in January 1998, closed its doors on Nov. 6 last year and filed for bankruptcy on Nov. 20. Early this year the company hoped to fetch $1.5 million for its domain name and Web platform, says David Madoff of Cohn & Kelakos, the Boston law firm representing Furniture.com. The failed company was also crafting a plan to get furniture stuck in warehouses to customers still waiting for orders.
Cybersettle.com: It Takes (Lots of) Time to Lure Old Industry Players to New Online Services -- Even Valuable Ones
Things at Cybersettle.com aren't as grim as they were at Furniture.com.
Yet.
