Inventory costs soared. The big concern for all of us in this business is customer-acquisition costs. And in this environment, acquiring new customers is extremely expensive. The venture capitalists apparently figured neither of the companies had a chance of making it on their own. But the two companies were largely incompatible.
Insiders say their staffs continued to squabble after the merger.
Worst of all, management failed to slash costs. The two outfits' Web sites never melded. That made it hard to eliminate staff duplication. Each company had an expensive warehouse in the same building complex near the Napa airport, and it took months to integrate the two. The companies spent millions on negotiating partnerships in Europe and Asia, while their basic business in the U.S. was coming under increasing pressure.