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Furniture.com closes doors, lays off most of staff

By Melanie Austria Farmer and Greg Sandoval
Staff Writer, CNET News.com
November 6, 2000, 9:05 AM PT

update Home furnishings site Furniture.com on Monday said it has shut down its business and dismissed most of its employees.
The struggling company, based in Framingham, Mass., has laid off 76 of its 88 employees, citing difficulty securing sufficient capital to fund operations going forward. The 12 remaining employees will resolve certain matters relating to the shutdown, including the review of available options for sale of the company's assets.

A severance package was provided to laid-off employees, the company said.

Furniture.com said it will contact customers with outstanding orders. Since May, the company said it has placed customer deposits and payments in an escrow account in order to safeguard the availability of funds for refunds.

Eligible customers who have not yet received refunds on their outstanding orders will be contacted by an account manager within approximately 60 days with instructions on how to submit refund claims, the company said.

Furniture.com has been aiming for a comeback since it landed $27 million in June from investors including venture capital firm CMGI, which, along with other investors, saved the company from bankruptcy.

Since laying off 41 percent of its staff in the beginning of the summer, Furniture.com has seen an exodus of high-level executives and top engineers. Also, growing pessimism among investors over new dot-coms, especially cash-strapped e-tailers, made it increasingly difficult for Furniture.com to stay in business, analysts said.

Furniture to firewood
Since June 1998, Furniture.com has gone from a top home-décor site with high-profile financial backers to a yet another dot-com casualty.
June 1998 Steve Rothschild launches Furnituresite.com
Jan. 1999 Changes name to Furniture.com
Receives $13 million in funding

June 1999 Receives $35 million from CMGI and other investors
Oct. 1999 Secures Goldman Sachs as lead underwriter
Jan. 2000 Files for IPO
Mar. 2000 Goldman Sachs drops out
Apr. 2000 Lays off 30 of 230 employees, 12 percent of staff
June 2000 Prepares severance checks
Lays off 80 employees, 41 percent of staff

Receives $27 million in cash injection

Pulls plans for IPO

Nov. 2000 Better Business Bureau receives about 70 complaints
Ceases operations

Gene Alvarez, an analyst at Meta Group, said consumers just weren't ready to buy furniture over the Web, and still aren't.

"(Consumers) just don't trust the Web enough for that type of purchase," said Alvarez. "It's a very intimate (and expensive) purchase."

Alvarez pointed to a number of flaws in selling furniture online that forced most of the niche players out of business. The problem with selling furniture over the Web is that it lacks the touch-and-feel aspect that goes hand in hand with furniture shopping. Customers want to be able to test how firm a particular sofa is and feel the texture of different upholstery fabrics, he said.

Other online furniture retailers have recently shut down or drastically restructured. Amazon.com-backed Living.com in August ceased operations, filed for bankruptcy, and laid off 275 employees. Another online furniture store, HomePortfolio, in September closed its e-commerce business and said it plans to reinvent itself as an application service provider for the furniture industry.

Additionally, consumers were wary of higher costs for shipping and handling when buying furniture over the Web. A number of items are not deliverable via the U.S. Postal Service, Federal Express or United Parcel Service, so specialty delivery services were oftentimes more expensive, added Alvarez.

"Customers just weren't interested," he said.

Former employees told CNET News.com in July that much of Furniture.com's problems could be blamed on the company's poorly constructed back-end computer systems. Furniture.com struggled to ship, track and charge properly for the goods it sold.

Last summer, the central New England chapter of the Better Business Bureau said it had received 44 complaints, most about late delivery, from Furniture.com customers. And last week, chapter president Barbara Sinnott said her office had received more than 70 new complaints over the past several months. The complaints were still being processed, but the BBB said that like the last batch, most appeared to be grievances over late delivery.

On Sunday, several former employees, who requested anonymity, noticed that their bank accounts had received deposits from Furniture.com. They said the money was the equivalent of about four weeks' pay.