UPDATE: Lack of DM Experience Hurt Lucy.com, Experts Say
The company -- which sells sporting apparel, footwear and accessories for women age 25 to 40 -- announced just before the end of January that it would close its Web site and catalog operations and would concentrate exclusively on traditional brick-and-mortar retailing. The reason for the decision was simple: insufficient capital.
The move came 14 months after Lucy.com's online debut, more than three months after the launch of its catalog and less than three months after opening its first brick-and-mortar location in New York. The company eliminated 60 percent of its staff by dismissing 57 employees.
Industry experts speculated that Lucy.com spent too much money on the Internet and did not pay enough attention to direct marketing principles. Those same experts disagree, however, on what avenues the company could have taken to avoid downsizing.
"A company can't really be successful if they don't have a firm understanding of direct marketing," said David Tibbetts Sr., president of Catalog Solutions, Enfield, NH, a catalog consultancy. "It's the only way to survive."
While reports have indicated that the number of online buyers reached record numbers during the past year, especially during the 2000 holiday season, Web merchants are realizing that e-commerce sites can be just as difficult to maintain, and just as expensive, as brick-and-mortar shops and even catalog operations.
Lucy.com's strategy to begin its business online was possibly more difficult and expensive than starting with a catalog, according to Tibbetts.
"They should have started the shop first and then branch out with the catalog and Web site," he said. "What they needed to do was to build a buyers list, which would help them tremendously in building a successful catalog and eventually a Web site."
However, there have been successful e-commerce operations that began online before branching out to include catalogs and retail shops as part of the marketing mix, said Andy Sernovitz, president of Gas Pedal, New York, an Internet marketing firm.
"It's a lot easier to start a good Web site than a catalog," Sernovitz said. "But if you don't have a grounding in direct marketing, then you're not going to make it. It's the same skills you'll need whether you're online or offline."
Internet companies can grow too rapidly and pay too little attention to basic direct marketing principles, often resulting in their demise.
Sue Levin, president/CEO of Lucy.com, Portland, OR, said the company attempted to grow the business in three channels of distribution simultaneously. However, the capital needed to execute this strategy was not available.
"We decided to focus on the channel that we think has the clearest path of profitability, which is the brick-and-mortar," Levin said.
The evaporation of capital has made it increasingly difficult for companies to maintain Web sites, said Heather Dougherty, retail analyst at Jupiter Research, New York.
"It takes a lot of investments, and until you can get the operation to fund itself, it's going to be a problem," Dougherty said. "Going after a niche group slices the market a little thinner and makes it increasingly difficult to gain access to more capital."
Lucy.com could focus on building its brand through the brick-and-mortar channel and look for partnerships in order to expand, Dougherty said. It eventually could relaunch its catalog and Web site, which could be easier once the branding effort has produced results.
Levin said the company plans to open additional shops within the year and is not ruling out a return to the Web or catalog operations.
"We're actively looking for partners and other low-cost ways to do direct mail, which could happen this year," she said. "Nothing formal is in the works, but if something turns up, we will pursue it."
In October, Lucy.com partnered with gym chain Crunch Fitness International to open a 900-square-foot lucy@crunch store in New York.