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Demise of living.com is further bad news for Amazon


Living.com, a major on-line furniture and home products retailer based in Austin, Texas, announced this week that it will file for bankruptcy and has laid off 275 employees. On-line retailer Amazon.com held 18% of the shares in the company.

"The decision to close our store was an extremely difficult one," said Shaun Holliday, living.com's chief executive officer. "We assembled a world class employee team, first rate partners and investors, and top tier suppliers. Our web-site is considered the gold standard in Furniture and Home Furnishings on-line. Despite our employees' tremendous efforts and the loyalty of our customers, the recent downturn in the capital markets has substantially impaired our ability to raise the capital required to achieve profitability. After exhausting all apparent alternatives, we have no choice but to file Chapter 7," referring to part of the US bankruptcy code that signals the immediate demise of a company.

The collapse also affects Amazon.com which was both an investor and a “trusted partner” of the failed company. Amazon.com had just three months ago added a link from its site to an Amazon.com and living.com co-branded site for “home” products as part of its expansion into new retail markets.

Amazon also recently linked up with Toys R Us, a successful bricks-and-mortar company with a struggling on-line venture, to sell toys and baby products. Amazon’s most recent financial results showed that its investments in companies such as living.com were costing over $100 million per quarter. The bankruptcy of living.com will be seen as further evidence for Amazon’s critics who suggest that the retail giant will never show a profit. The editor of US magazine Red Herring, seen by many as an authority on e-business, recently described Amazon as a “terrible company”.

Coffee retailer Starbucks, another investor in living.com, has warned its own investors that it will have to write-off its $20.6 million investment in the company.

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