Bad news for San Francisco based ecommerce site Red Envelope, an “upmarket online retailer with the primary goal of making gift giving easy and fun”: it’s about done. The company’s market cap is just $2.95 million even though it has cash on hand of nearly $12.3 million. The stock is trading at $0.23/share - it was as high as $8.42 in the last year.
Red Envelope was founded in 1997 and went public in 2003. But a steady stream of losses has taken it’s toll. CFO William Gochnauer resigned earlier this month, and board member John Pound resigned on March 30.
In a SEC filing on March 31, the company announced their credit line with Wells Fargo was terminated, the final straw. They also said they would be unable to continue operations and were talking to buyers.
On March 25, 2008, the Company received a letter from Wells Fargo Retail Finance, LLC (”Wells Fargo”) regarding the Company’s Loan and Security Agreement, dated June 26, 2006 (the “Loan Agreement”), between Wells Fargo and the Company. The letter advised the Company that for various reasons Wells Fargo would no longer provide the Company with the ability to draw on the credit line. As a result, the Company has insufficient funds to continue operations as a going concern.
The Company is currently engaged in discussions with two potential acquirers for the purchase of substantially all of the Company’s assets. However, there is no guarantee that the Company will be able to complete an acquisition in a timely manner, or at all. If the Company does not complete the transaction it may be forced to cease operations. In addition, a potential transaction may involve unexpected costs, liabilities or delays. The Company may be adversely affected by the announcement of the proposed transaction and the related process of soliciting alternative transactions, or by the uncertainty relating to the potential transaction or the possibility of another transaction involving the Company.
Everything up to this point is fact - what comes next is rumor: We’ve heard the company is basically laying off all of the staff and shutting down in the next few days. We have an email in to the company for comment.
Never nice when this kind of thing happens, I hope they can get things sorted before they have to let everyone go!
I went to their site and frankly “gift giving” is anything but easy.. I got lost and came right back here to report.
Ug. This is kind of sad, as I found some cool gifts here over the course of a few years (but with the last purchase being at least a year ago).
Probably the biggest problem is that they were basically SkyMall without the inflight marketing combined with a good, but only good, gift suggestion engine. In a world where online shopping has yet to equal the lifestyle statement of bricks-and-mortars (at least at the upscale end), this wasn’t good enough to survive.
RIP Red Envelope, if indeed the rumors are true.
Ouch. Their offices are prime real estate right downtown San Francisco on New Montgomery. Shame.
I think netflix should buy their domain once they file for bankruptcy. Would be kinda neat to see them maybe get a TM on the red envelope.
I think we should buy this company to re-sell it to some of their chinese suppliers couple of months later..
I wonder if they are for sale? Seems like their model wasn’t too appealing. People are looking for cheap things these days - especially with the increase in manufacturing costs.
Its always surprising and saddening to see well-funded and well-planned companies biting the dust.
RK
RentalAndRealEstate.com
Not for nothing, once again, possessive its = its.
@4…exactly what I was thinking.
According to Item 2 in the 10-K, they lease 28K SF of space on I think New Montgomery.
Somebody needs to pull that lease, if they signed it in 2003-2004 and have 4-5 years to run, there might be $1.5-2M worth of value in subleasing. Usually the profit is split 50/50 with Landlord, leaving $1M worth of value.
The joys of TechCrunch….
@1, @4: Prime real estate??? Why, on God’s earth, did they need prime real estate? That dopey decision foreshadows failure in and of itself.
the problem is/was the last CEO John Pound. How do you run a company with a great brand and an ok cash position out of business in less than a year. For that matter how do you run a business that has good revenue out of cash. Ineffective leadership, no strategy and incompetence as far as I can tell from conversations with insiders. Also don’t think he had any operating experience which certainly didn’t help
When I was at Wal-Mart.com years ago, Red Envelope was a web competitor that impressed. They had good merchandising, one of the better UIs around and were disciplined enough to establish a pretty successful niche when other “etailers” were floundering about, wasting money and dying off in droves. Given how long they’ve lasted, one would think that the customer relationships and brand alone would have to be worth something. Hope things work out for them.
I never went to the site, but it looked like a good site.
RIP
-Michael B, check out my site for ways to make money online. http://mikesmoneyclub.blogspot.com
a great brand but they built bad technology and could not be nimble…their custom version of marketlive (part of the problem) strangled them….a good asset buy for the right gift cataloger……and a nice cheap expansion for the art academy across the street!
Wow, that’s too bad. I actually liked their site and service… they always had unique gifts… and my mom always loved the fancy boxes and ribbons their gifts came in.
RedEnvelope has a great presence and brand in the market. I think letting their doors close would be a missed opportunity for investors. Operational ineffecencies and financial unruliness were clearly the cause of their issue. These can be corrected and a fruitful company will result.
(And of course, a timely pull of their loan has much to do with the issue. If all of our loans/credit cards were pulled on us and suddenly due, how many of us would be able to handle? Few to none. )
That sucks…i planned on getting an awesome baby gift for a friend the we were given from there in the Fall. They actually had really nice things—good quality and their customer service was very good. Shame to see them go…
Is this just the web portion of the business or the web and catalog?
You would think someone would buy/fund just for the database they should have?
I hope no one is blaming the economy for this ending…
They have a market cap of under 3 million, and they have cash on hand of over 12 million. And 121 Million in revenue last year? Are they breaking down under a debt load or something? those numbers don’t seem like they add up to unable to continue without wells fargo credit line. It only took a new CFO 2 weeks to give up/in, so…is there more to this story, or? Is there some vulture waiting in the wings?
For years they bought several items we manufacture here in the southern California. they sold thousands of units but one in particular, a sleeping elephant went gang busters and apparently the joke at red envelope was “it was a real sleeper”. They changed their business focus a few times and lost a few key buyers not sure if that played a role. my wife and i would shop there and were always pleased but eventually got bored with expensive imports and spent our money elsewhere. they were a good company and a good account of ours for many years and i hope they can rebound.
I always thought their products were for people you didn’t really know or like–like for your boss’s birthday or a office gift exchange.
It’s really sad. In the early days (way back in late 1990’s and early 2000’s) they were one of the few places online that had distinctive gifts. However the last few years it got very watered down and I sure couldn’t figure out who was their target customer. Plus the competition was wicked from major brands going online in a meaningful way and the rise of indie boutiques, etsy and others.
They also never embraced any interactive experiences such as reviews/ratings and the site seem to lose even more of a personality. In the end they seemed to be copying everything we sold on Delight.com.
RIP, Red Envelope
This news is correct. I have a friend who works there and yesterday was her last day. They expected someone to buy the company, but the bid did not come, so the staff was told they do not need to come back to work.
They were worried about their paychecks and things like vacation, etc, which everybody should receive according to the law, but someone mentioned they could go through bankruptcy rules, and it could take a while to get their $$. She’s waiting for more news now…
It’s very difficult to merchandise gift sites. While doing an ok job RedE was still somewhat cumbersome. Customer follow-up and connection was lacking and I for example only ordered once and had only heard of it from working in the industry. Failure to have a 2.0 strategy could be lumped in with internal factors such as comment 12 above, and together you would get a completely unsustainable situation. Disconcerting to see a listed company go down.
http://bobketner.com/news/news/
They remind me of Garden.com back around 2000. Great service and presentation, but just couldn’t make it.
The products they send out look awesome, but it cuts way to deep into the low margins.
Will be missed if it is true.
was kinda pricey and these days can find similar products without too much effort… was nice to have them consolidated as I don’t like to spend time shopping, but still found them not *that* unique for the prices. I looked several times, but never purchased.
Great article on where the writer believes they stumbled on marketing/acquisition efforts. Pretty much looks like some marketing 101 stuff was completely overlooked. Also funny that one of the previous posters found the site to be immediately confusing making a purchase hardly conducive, I agree, as does the blogger below:
http://lairigmarketing.blogspo.....elope.html
damn shame. good brand.
The rumors are true. I work in the building that housed their corporate office and I can confirm - Red Envelope is no more.
Prime real estate that will be on the market for less than a second. San Francisco SOMA is doing great! And no, no one would sublease from a bankrupt company.
I would like to offer an alternative site for Gift Giving: http://www.MyGiftee.com
Maybe they’ll give Caffe Trieste gift cards as severance.
Another SF firm like Sharper Image with a great brand name that was poorly run in the last few years. For the past 7 years I have been watching them they have overspent on marketing relative to competitors like Brookstone who’ve had a clear and consistent focus on delivering profit growth to investors. When they had a CEO that was focused on delivering operational efficiencies (read profit) they fired him as he wasn’t delivering the top line growth the board sought. Very sad.
as a previous employee of RedEnvelope, they are closing our inbound call center here in San Diego TODAY and everyone is being let go. Not much info coming down the pipeline as to whether a $uitor has been found….c’est la vie I don’t have an MBA or even a BA for that matter, but I always wondered why they based their ADMINISTRATIVE functionshere in California, on the the richest and most expensive countries on earth. I thought more efficiencies could be realized by moving the center to Ohio where the distribution center was?!?!
as a previous employee of RedEnvelope, they are closing our inbound call center here in San Diego TODAY and everyone is being let go. Not much info coming down the pipeline as to whether a $uitor has been found….c’est la vie I don’t have an MBA or even a BA for that matter, but I always wondered why they based their ADMINISTRATIVE functions here in California, one the the richest and most expensive countries on earth. I thought more efficiencies could be realized by moving the center to Ohio where the distribution center was?!?!
Another tenant in the same building was Perpetual Entertainment, who recently sent everyone home too. So now there will be 5 floors empty in the building. Nimblefish (an enterprise software company, where I work) is on the top floor. It’s a block from Moscone Center.
Red Envelope was a good site, but nothing exceptional. They were trying to be everything to everyone, which really went against their mantra of trying to be personal, unique and upscale. Why were they selling Halloween costumes?? Sadly, Red Envelope had a lot of potential that was never realized. Lucky for consumers, there are other options in the market that get it right. Wishwrap (www.wishwrap.com) is a good alternative for special occasion gifts. Fortuitously, it is also based in San Francisco!
any updates on the status of Red Envelope?
I heard they have another buyer in pipeline and are waiting to hear from them by end of day (4/7) Site is still up and running.
Just curious if anyone knows anything about the status of RedEnvelope pending orders. I am still waiting on an order that was supposed to be shipped by now and I haven’t received any updates in the last 3 weeks. I chatted with one of their reps online and they told me it would be shipped today and still no updates since then.
Any help here would be appreciated?
RedEnvelope, Inc. Announces Receipt of Nasdaq Delisting Letter
SAN FRANCISCO, April 9 /PRNewswire-FirstCall/ — RedEnvelope, Inc. today announced that on April 2, 2008, it received a Nasdaq Staff Deficiency Letter (the “Letter”) stating that Nasdaq had previously notified the Company that if it had not held an annual meeting of stockholders by April 1, 2008 the Company’s common stock would be subject to delisting. The Letter notes that the Company is not in compliance with the requirements for continued listing on the Nasdaq Capital Market set forth in Marketplace Rules 4350(e) and 4350(g). The Company is considering whether to appeal this determination and possible delisting pursuant to the procedures set forth in the Nasdaq Market Place Rule 4800 Series. However, there can be no assurances that the Company’s appeal, if made, will be acceptable to Nasdaq. If the Company’s appeal is not successful, or if an appeal is not timely made, its common stock may be delisted from the Nasdaq Capital Market.
We ship for them, did for years. There were always funny disconnects: customer value vs. their margins, etc. We got no warning - and they owe us money. May I suggest http://www.givingplants.com ? One of the great things about the last dot com shakeout is how relatively easy it was for the surviviors after the crazy money went away …. of course, back then the consumer still had cash to spend.
their stock is tanking and now they are valued at less than $1mm. any idea on who is buying them?
Does anyone know why I’m still getting e-mails from Red Envelope trying to entice me to their site to buy buy buy?
A great shame for what seemed like an appropriately positioned brand in this sector.
I always admired their simple, thoughtful U.I. - Anyone know the people responsible for developing it?
soma some buy buy gartner’s soma
redenvelope is back in business.