Cash flow problems could mean its a wrap...

Are we about to see the return of the dot.com bust as online businesses also struggle to handle the consumer downturn?

Things are very different from the dot.com bust in 2000. The consumer use of e-commerce is much better established and recent data suggests that online sales are booming - certainly compared with the tough market conditions experiences by high street retailers.

But strong online sales growth doesn’t mean that every e-commerce business will prosper.

The case of Wrapit (www.wrapit.co.uk) is a good case in point.

Wrapit is a high profile online business. It was founded by former fashion journalist Pepita Diamand back in the initial dot.com boom of early 2000. Diamand has picked up lots of publicity over the years and is a well-known entrepreneur.The story of Wrapit is described here in an article titled “My First Million” How quickly things change!

Wrapit has a clear product focus - it provides an online wedding gift servie. Wrapit allows couples to compile their wedding lists, with guests able to buy items online through the website. Wrapit buys and delivers the items, with an aim to deliver them within eight to 12 weeks.

The problem? Wrapit appears to be running out of cash. Wrapit has confirmed it is in talks to avoid administration (a form of insolvency) after suffering financial difficulties since the end of 2007.

Wrapit’s ability to generate publicity may end up being its downfall too. The problem with being a high-profile business is that when things go wrong, the media are interested too.

The financial problems faced by Wrapit were aired during a feature on BBC News TV yesterday, and the story is featured in all the broadsheet financial papers.

There are good articles in The Guardian and The Telegraph for example.

The Telegraph article is particularly good material for students looking at customer service. Interesting how consumers can now use social networking sites such as Facebook to group together and complain about their shared experience of a business.

Reading the articles, it is hard to imagine how Wrapit will be able to recover from the financial crisis. Once they have lost the goodwill of their customers, few newly-weds will want to entrust the management of their wedding list to the business. But we will see.

A good case study for A2 students to follow over the next few months.