March 13, 2001, 5:11 PM — Etown.com, based in San Francisco and owned by Collaborative Media LLC, shut its doors yesterday, laying off its entire staff.
The company, which had about 100 employees after December layoffs cut 22% of the staff, ran out of money, company officials said.
Etown gained national attention in December when some of its customer service staff attempted to unionize. Following the layoffs, the Northern California Media Workers Guild, which was attempting the union effort, filed a complaint with the National Labor Relations Board (NLRB) accusing Etown of illegally tampering with the employees' unionization attempts by retaliating with the job cuts. The company denied the charges. The union withdrew the charges this month, and Etown employees were finally set to vote on whether to join a union (see story).
Etown's David Elrich, editor-at-large until yesterday and one of its co-founders six years ago, said unionization efforts had nothing to do with the company going out of business. He reiterated remarks by CEO Robert Heiblim, saying, "He basically said that when he was talking to investors, it was a non-issue."
The fate of Etown now rests entirely with BestBuy.com, a subsidiary of electronics retail giant Best Buy Co. in Eden Prairie, Minn. "Our lead investor was Best Buy, and yesterday, they just said, 'That's that,' and that was the end of it," Elrich said. "Without their backing, we just couldn't make it."
After BestBuy.com announced a $10 million investment in Etown in December and a deal that allowed it to reprint Etown content on BestBuy.com, Best Buy effectively owned Etown. At the time, the move was seen by some analysts as a way for BestBuy.com to begin to challenge Amazon's electronics supremacy online. Calls to Best Buy weren't returned by deadline.
Among Internet electronics stores, Etown was rated second only to Amazon.com in a Fall 2000 roundup by Internet ranking firm Gomez Advisors Inc. in Waltham, Mass. A Gomez report said Etown was an "innovator" with "some of the best online information for evaluating and choosing products."
Lessons from Etown's failure for other dot-coms are unclear. Elrich blamed its failure on "the macroconditions of what's going on in the market." Like other dot-coms stung by recent investment downturns, Etown was unable to sustain itself on its core business model, which was referrals.