FUNDING WOES ABRUPTLY SHUT DOWN SHOPLINK

JON SPRINGER

WESTWOOD, Mass. -- ShopLink.com abruptly closed shop last week, becoming the second Boston-area Internet grocery delivery company to announce a closing in as many days.

Like Streamline.com, the ShopLink rival that said it would wind down operations this week, ShopLink said a lack of available funding forced its closure. The company employed around 390 workers and served Boston, southern Connecticut and parts of Westchester County, N.Y.

The company late last week was mulling its next step, John Icke, ShopLink chief executive officer, told SN. "The liquidation of our assets is a possibility," he said. "We have to take care of our employees and creditors."

The company closed with little warning last Tuesday evening, leaving some customers to pick up their own orders of dry cleaning and services outsourced by ShopLink, either at the vendor's place of business or at ShopLink's distribution centers. The suddenness of the announcement created challenges for its local service partners and vendors, including Minneapolis-based food supplier Supervalu, which according to reports had a delivery turned away from ShopLink's warehouse last Tuesday.

"The phone has been ringing off the hook from customers looking for their orders," John Dallas, owner of Norwell, Mass.-based Fabricare, a dry cleaner that partnered with ShopLink, told SN last week. "The closing was very abrupt. They called me at 6:30 [last Tuesday evening] and told me. They had brought orders to me earlier in the day."

Dallas said his firm handled around 1,500 pieces of dry cleaning weekly for ShopLink and that the company owed him around $10,000. "Considering the amount of business I got from them, I assumed they were doing quite well," he said.

ShopLink in fact was losing money, and had recently laid off 20 employees and canceled a planned expansion into Philadelphia, Icke said. The company's plans earlier this year called for expansion into as many as 30 markets by 2003.

Icke said the decision to close was made early last week by the company's board of directors and investors, including New York-based Soros Private Equity Partners, MF Private Capital and BancBoston Ventures. "Our current investors no longer had the capital to fund our business and the market for funding for Internet B2C companies has been brutal," he said.

ShopLink was founded in 1996 and launched its service around Boston in 1997. Like Streamline, ShopLink aimed at upscale consumers who paid a monthly fee for scheduled, unattended delivery of groceries and concierge services such as dry cleaning and film processing.

The company said 70% of its customers used the service on a weekly basis and that the average order exceeded $107, figures pointing toward a clear demand for the service. However, Icke acknowledged the future probably belongs to established brick-and-mortar grocers, which are adding Internet-based options partially as a result of companies like ShopLink.

"The great irony of the situation is that many of the pioneers of this business are the ones who will create a model for traditional brick-and-mortar players," Icke said. "I can't believe that companies like Safeway or Ahold would ever have gotten into this business had companies like ourselves, Streamline and HomeRuns.com not proven there was a demand and that consumers don't like going to the grocery store."

Icke said he received more than 400 e-mails from customers "devastated" by the loss of the company.

In the near term, observers said former customers of ShopLink and Streamline in the Boston area would likely turn toward traditional grocery stores. HomeRuns.com, the lone remaining "pure-play" in the Boston area, could gain some customers. Quincy, Mass.-based Stop & Shop, which now operates Internet ordering and delivery through Peapod in both areas served by ShopLink, also stands to gain.

"These failures [of Streamline and ShopLink] speak to the financial problem inherent in the pure-play model: the need to build and fill a large distribution center, and then go get the customers," Dave Brandkamp, vice president of sales for IDS, an East Greenwich, R.I.-based technology company that provides Internet shopping for traditional grocery stores, told SN. "The viability of home shopping is proven, even by the failures. Both companies had great demand, but not enough to offset the huge investment that the pure-play model required."

Matt Stamski, senior analyst for e-commerce research firm Gomez, Lincoln, Mass., speculated that ShopLink and Streamline may have considered combining their operations for greater strength in Boston but added that neither company appeared to be financially strong enough to keep such an operation afloat.

"There might have been something to gain by combining their marketing power in Boston, but at the end of the day they might have run into the same problems," Stamski said.

In a letter to consumers appearing on ShopLink's Web page, Icke urged consumers to alter garage door access codes and remove keys that may have been left for ShopLink deliveries.

"We would like to apologize for the abrupt nature of the cancellation of our service to you," Icke's note to customers read. "General financial market conditions have not been favorable to business-to-consumer e-commerce companies irrespective of the current performance and long-term value. We had no choice but to close the business."