Life After Boo
Hip fashion sites say it isn't over - but venture capitalists aren't so sure
BY JENNIFER COUZIN
Unless you're a teenage girl, you probably haven't heard of the designer brands that stock Girlshop: Eugenia Kim hats,
NM70 footwear, Jussara dresses and more. Girlshop has been around for two years, takes in about $100,000 a month and has
never sought funding beyond a small friends-and-family round a year ago. In its offices at the edge of New York's trendy
meat-packing district, the 12-person company is pouring revenues back into the business. This year, it expects to break
Girlshop's low-key operations, run on a relative shoestring, made it something of an anomaly when online retailers
were taking in tens of millions of dollars from investors and spending that money lavishly. These days, though, Girlshop
is starting to look like a trendsetter. After the crash and burn of Boo.com, other pure-play apparel firms are treading
cautiously, running pared-down operations. Boo made that approach a matter of necessity, not just because its demise
underscored the folly of free spending, but also because it left investors wary of online retailing.
"The Boo.com situation has hurt us not necessarily in sales but in perception," says Lynn McPhee, the CEO of Xuny,
which sells "street-wear fashions" targeted at young people. Xuny has raised $2.5 million so far, and McPhee says it
expects to close another round later this summer. But the company hasn't raised enough to sustain itself with its site
alone. It has cobranded some of its merchandise with content providers and is working on deals with several mainstream
department stores, which will sell Xuny brands. These imaginative approaches provide the company with 85 percent of
its revenue; only 15 percent comes from the site.
When it comes to high-end apparel in the post-Boo era, imagination supplies vital fuel to any Web venture.
Smartcasual.com, which targets professional men whose dress codes have recently shifted from suits to casual wear,
is slated to launch this fall. Gazelle.com went online in February, and sells only hosiery. With $8 million raised
so far - $5 million from Minotaur Partners in Chicago - the company is ahead of many competitors. But the Boo debacle
scared off potential European investors, and Gazelle is focused on containing marketing costs. "We're working our
damnedest to get on Oprah," says Allen Levenson, president and cofounder, without a trace of irony. "It is, as you
know, the pinnacle of great - i.e., free - marketing."
Admittedly, the difficulties online apparel companies face go far beyond Boo. Unable to touch and try on the
clothing, or even get a good look at it on their computers, customers may simply prefer to shop at their favorite
boutique, or navigate to a Web site with a familiar brand.
"I have a big concern about the viability of being able to sell high-end apparel on the Internet," says Jerome Chazen,
the founder and former CEO of Liz Claiborne (LIZ) who now runs Chazen Capital, an investment and consulting firm in New York.
Chazen invested his money in the Fashionmall.com portal. (Fashionmall also purchased the Boo brand name.)
While Chazen and others argue that no one will go online to buy brands they don't know, several apparel pure-plays
are betting that fashionistas are tired of well-publicized brands with stores on every street corner. "What these women
share is a passion for fashion," says Natalie Massenet, the founder of Net-A-Porter, a London-based high-fashion site
that launched in June. "They're not afraid to experiment with fashion; they're not followers."
These sites are counting on a must-have mentality among customers. Raj Pamnani, a managing member of Quantum Venture
Partners, which invested $100,000 in Xuny, is convinced that young people are desperate for hip urban wear. Nicole Murray,
the founder and CEO of NM70 footwear in New York, adds that she's so overwhelmed with orders she can't handle them all
on her own site - so she also sells through Xuny and Girlshop.