David Jones squeezes TheSpot

After a week of silence over reports that David Jones would rescue floundering e-tailer TheSpot, the department store confirmed today it has taken over the dot-com to bolster its own e-commerce business.

TheSpot will become the "backbone" of davidjones.com.au, said Justin Punch, TheSpot's co-CEO. Its retail suite, HealthSpot, BeautySpot and ToySpot, closed down yesterday.

David Jones will acquire selected assets from the TheSpot including its call centre, its Sydney office and warehouse, all its IT infrastructure, and 10 out of 30 staffers to fulfil customer service, production, distribution and web-design roles.

The remaining staff have received "complete redundancy packages", while some were being placed in other jobs, the company said yesterday.

TheSpot will relinquish a strategic relationship with IT partner Cortex eBusiness, handing it to David Jones to develop its e-commerce arm. David Jones will also partner with XT3 to develop business management systems for its website re-vamp, the retailer said.

Davidjones.com.au will begin accepting customer orders after the Olympics, for "non-quantity, replenishment and in-store products", according to Jenni Deslandes, David Jones' general manager of e-commerce.

Deslandes added that the retailer would be cautious to sell "high-end" fashion online due to the fulfilment risk associated with imports and seasonal merchandise.

David Jones' CEO, Peter Wilkinson, insisted that the acquisition would not become an "add-on" to the department store giant's e-commerce operation, but would provide a "strategic fit with David Jones' e-commerce development".

David Jones was keen to model its online store on TheSpot's merchandise sites, citing the company's sites' "excellent" functionalities like shopping basket and payment process features, Deslandes said.

David Jones had been negotiating the deal for a month, according to Deslandes. The takeover was brokered so "rapidly" due to TheSpot's "high burnout rate" since forming in early 1999, she said.

TheSpot's $11 million startup capital had been all but spent earlier this month, Punch conceded. He said it would "not be unreasonable" to suggest it had a zero bank balance. "It takes a lot of money to build a business like this," he said.

Various reports speculated that TheSpot had over-spent on marketing and IT operations. However, Punch could not pinpoint where the business plan had failed, only admitting that TheSpot had struggled for the past 12 weeks to secure investor backing. All e-tailers competed in a "hyper-competitive market" for investor capital, he believed.

However, his outlook on the buy-out was optimistic. "We've built the best e-commerce infrastructure in Australia, so this is the centrepiece of what could be the best online retail business," Punch said. "It's all going to be about clicks and bricks."

TheSpot's former primary stakeholder, f2 Investments, withdrew its $4 million stake in the e-tailer yesterday, seemingly amicably. F2 Investments will account for the failed venture as an "abnormal item" in the current financial year, said Nigel Dews, f2 Investments' CEO.

Dews seemed to welcome the takeover with relief. "This transaction clears the decks, enabling us to build on the good working relationship established by the two companies," he said.

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