(CNN.com, June 9, 2000) -- Even as Europe gets moving in the e-commerce world, it has suffered its first major dot.com failure with the recent collapse of clothing retailer Boo.com

Launched with blizzard of publicity, Boo.com rapidly turned into a dot bomb, burning through $120 million in six months before investors pulled the plug. A last ditch effort to get $30 million more failed in May.

Boo.com's failure is generally blamed on its expensive marketing budgets, high technology costs and its ambitious Web site, which was graphics heavy, meaning for users with a 56K modem it could take several minutes to load. To fully experience the site required a high bandwidth Internet connection and few home users in Europe or the U.S. have a high-speed connection.

U.S. based research firm Datamonitor said Boo.com's high profile marketing campaign allowed the company to burn through its startup capital before it could launch a stock market offering.

The site also had difficulties with its technology, which caused a six-month delay in launching the site. The company spent a lot of its capital to develop the computer systems it needed to serve customers in the 18 countries the site served.

And even as Boo.com crashed and burned, accounting firm PricewaterhouseCoopers (PWC) released a commissioned study that found one in four Internet firms recently floated in London is in danger of running out of cash within the next six months.

A dot.com shakeout?

The European e-commerce market is "still more nascent than the U.S.," said Charles Abrams, a senior analyst with the Gartner Group in Europe focusing e-business management strategies.

Abrams says the business-to-consumer e-commerce companies have been overly hyped by the media and analysts because these online retailers seem more glamourous than other types of Internet businesses.

The PWC study said that 25 out of 28 public companies could burn up their cash reserves by August 2001, which is well before most are expected to reach the break-even point. The study cited marketing and technology costs as the reason for the high spending.

PWC said that the hunger for funding would be likely to hasten the pace of consolidation in the sector, driven by the need to generate savings and enhance revenue.

"There is a shakeout occurring in the dot.coms," Abrams said, noting the Gartner Group has made the controversial prediction that 95 to 98 percent of all dot.coms will fail within the next 24 months.

Indeed, several popular Internet retail sites have folded in recent months, including Disney's Toysmart.com in the U.S. Cash-strapped Internet grocer Peapod.comÊhad to be rescued from oblivion by Dutch conglomerate Royal Ahold.

Abrams said the businesses that will be most successful in e-commerce are hybrid organizations that create a Web presence along with the traditional brick-and-mortar stores.

"In Europe, that is where the action is and the successful models are existing brick-and-mortar companies turning into hybrid entities," he said.

Become an e-business or go out of business

In addition, a recent study from e-commerce research firm Jupiter Communications says that consumers are likely to spend $630 billion in traditional retail channels as a direct result of researching products on the Internet.

In other words, traditional sales are likely to boom from the Web's influence, so anyone doing business online needs to combine traditional and electronic retailing methods, according to Jupiter.

"Online consumers are a very powerful audience and tend to be channel-agnostic" said Ken Cassar, a senior analyst with Jupiter Communications. "And as consumers increase their use of the Internet, the opportunity for the Web to influence their online and off-line shopping behavior grows. Simply put, businesses must integrate across channels."

Abrams says Gartner's advice is that "every business will need to be an e-business" or face "going out of business."

But Abrams also said the pure Internet business model isn't doomed. It's just that many of the current companies are "not firmly built on business models that are going to make money," he said.

There is no Amazon.com or Yahoo in Europe," he said.

Not all doom and gloom in European e-commerce

One factor holding Europe back in the consumer e-commerce market is the lack of Internet access. The continent has lagged behind the U.S. in home Internet access, but that is projected to change.

Datamonitor, a U.S. market research firm, predicts that 64 million European households will have PC-based Internet access by 2004, up from 25 million in 1999. The past year also saw rapid increases in households gaining access, mainly due to plummeting access costs and increased publicity.

But those figures don't include access through non-PC devices like Web-enabled televisions, mobile phones and handheld computers. Datamonitor projects that one in five European households will have interactive TV by 2003.

Abrams said Europeans will be 100 percent ahead of the U.S. in terms of digital TV penetration rates. He noted that more than 60 percent of European summer vacations are now being booked through TeleText, a text-based service offered via television.

Britain, in particular, is expected to take to online commerce. Fletcher Research, the British arm of U.S.-based Forrester Research, released a report in May that predicts Britons will spend $30.4 billion online by 2005.

Some companies are ready for the future online shoppers. Tesco, the British grocery store, has launched Tesco Home Shopper which allows customers to browse through about 20,000 different stock items on a CD-ROM. Customers can select the order off-line and then place it via the Internet with delivery made to their homes. The program is currently available only to customers near selected stores in the London area, but Tesco plans to extend the service.

"Ordering groceries in the U.K. on the Web has taken off more quickly than anywhere else," Abrams said.

Dataquest, an information technology market research and consulting firm, predicts that the European business-to-consumer market will grow from $5.4 billion in 1999 to more than $115 billion in 2003.

"The advent of free Internet accounts is dramatically increasing the number of Internet users in Europe," said Blaine Mathieu, senior industry analyst for Dataquest's e-Commerce Worldwide program. "Relatively high penetration of smart cards, digital wallets, and other secure payment methods is reducing security concerns. Consumer e-commerce in Europe is promoted by the increased development of home-grown solutions, utilizing local currencies, languages, and distribution channels. Customers in other regions of the world no longer have to order from e-tailers based in the United States."

Mathieu said traditional "brick-and-mortar" businesses outside of the U.S. have gained an advantage by watching consumer e-commerce develop in the U.S. over the last two years and can avoid repeating the mistakes of real-world retailers who were caught off guard by the e-commerce revolution.

But with this new world comes a price tag. It will cost businesses to become e-business with Abrams saying a large corporation will spend at least $25 million and most businesses are underestimating how much it will cost.

"Most are trying to come to grips with what the expenditures will be," he said.

B2C overshadows B2B

The focus on business-to-consumer e-commerce has overshadowed the business-to-business marketplace, which Gartner predicts will be a $7.29 trillion market by 2004.

And while Europe may be behind the U.S. in the business-to-consumer e-commerce market, it is not as far behind in the burgeoning business-to-business online market, according to Nigel Deighton, the research director of Gartner's European office.

The PriceWaterhouseCooper study also reported that business-to-business companies were far more likely to get extra funding than business-to-consumer.

"That's where the real boom in e-commerce is. It's not glamourous like B2C and that's where all the attention is," Abrams said. "It's just now starting to get play."

Post Boo

Despite its high-profile bust, Boo.com was bought by New York-based fashionmall.com for an undisclosed amount of cash. The site promises that it will be "working diligently over the next few weeks to position Boo as the ultimate global fashion portal - to deliver all the great things you loved about Boo."

The technology that cost Boo so much to create was sold to Bright Station, a British e-commerce software firm, for $372,500. Sparza - Bright Station's e-commerce business - will rent out the technology solutions Boo developed to consumer retailers.

The technology cost millions of dollars to develop, and the low price it sold for guarantees that Boo's investors will lose practically all of the money they invested. The investors included Bernard Arnault, chairman of luxury goods group LVMH, the Italian Benetton family, Goldman Sachs and JP Morgan. The site was founded in 1998 by the model Kajsa Leander and fellow Swede Ernst Malmsten.

As for the designers of Boo.com, they haven't taken the failure of the site too hard. The entire 17-person design team is back online, hawking their talents via a Web site. www.Postboo.com. The site gives the names and titles and an e-mail address to contact them. It also showcases what they consider their best work.

However, their critics are still out there, creating parody Web sites. One such site, which is scathingly titled Schadenfreude.com, mocks Boo's form entrance page and says: "Boo.com has been shut down for being the biggest bunch of marketing-led content-free morons in European e-commerce. Nothing happens on this page." Caboom.com asks surfers to "come in and see our impassioned plea for hard cash. Going, going, gone."

CNNfn contributed to this story, written by Douglas S. Wood.