OPINION: The first digital Christmas will be the last for some dotcoms

Is Christmas 2000 the first digital Yule? Will you be getting your turkey from urbanfetch.com? Buying perfume from clickmango.com? Or perhaps ordering Christmas CDs from boxman.com?

Is Christmas 2000 the first digital Yule? Will you be getting your turkey from urbanfetch.com? Buying perfume from clickmango.com? Or perhaps ordering Christmas CDs from boxman.com?

I'm sorry to say you won't, because all three have gone bust. And they're not the only ones. You can add to this list furniture.com, dressmart.com, and theman.com. Oh, and streamline.com, thestreet.co. uk, pets.com and mothernature.com. Did I mention bike.com and ibelieve. com? Even bagsoftime.com has closed, presumably having run out of product.

The year of the dotcom boom has also been the year of dotcom doom. According to Webmergers, the leading internet experts, over 100 UK dotcom businesses have bitten the dust in 2000, 22 in October alone, and a further 21 in the first two weeks of November. Almost 10,000 jobs are estimated to have been lost in the fallout.

Even the big and famous have suffered. Sixty publicly quoted internet companies have seen their share prices fall by 90%. The hugely over-hyped lastminute.com has seen its market value tumble from pounds 730m to pounds 140m. The Nasdaq index of technology shares in New York has lost over one-third of its value since September.

Whatever way you look at it, 2000 has been a cataclysmic year for the dotcom sector. So what went wrong with the digital dream?

It is tempting to search for a single I-told-you-so reason, some monster banana skin only revealed by the arc-lamp of hindsight. In fact there are many reasons. Wildly inexperienced (though enthusiastic) management.

Wildly optimistic investors. In some cases sheer profligacy and hubris.

For example, Boo.com, the online fashion retailer, spent about pounds 80m in the seven months before it went into receivership. In the contorted logic of the new economy, the bigger the 'burn rate' (money down the pan) the sexier the company. The sector is older and wiser now. Companies are cutting costs to stay afloat. Burst.com, supplier of online videos, has shed 80% of its staff to keep running costs down.

In some cases, you wonder whether a grown-up business plan was ever written.

The relative ease and cost-efficiency of selling online does not necessarily generate healthy margins, as some dotcoms on wafer-thin commissions have discovered to their cost. Their numbers do not - and never will - add up.

Marketing and advertising must take their share of the blame too. Many ad campaigns left consumers baffled, and the deluge of new and unfamiliar brand names seems to have led to a kind of dotcom 'blindness'.

All these reasons are plausible. But perhaps the most important cause of the collapse is that too many dotcom services were simply not good enough. Recently, lastminute.com was voted the worst travel web site by readers of The Daily Telegraph. Which just goes to show that flashy marketing and PR can't paper over the cracks of a sub-standard product.

Online business is here to stay and will in time thrive and prosper. But we have learned this year that there is no certain or easy route to success.





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