David J. Cord is a writer and columnist for Helsinki Times. He is also a private investor with over ten years of international experience.

Retail is a tough business. Margins are miniscule, competition is savage and customers are picky. Information Technology is a tough business. Capital expenditures are high and returns are delayed. Putting retail and IT together in the form of internet shopping is notoriously difficult.

Some of the most spectacular business failures of all time were in retail e-commerce. Just this summer, online grocer Ocada went public at head-scratching valuations. Many in the investment community publicly wondered who would be silly enough to pay so much for so little, but people are still willing to pay a lot for an internet company. (Call it Dotcom Bubble Redux.)

CLOSER to home we have Fruugo. Fruugo is owned by some of the biggest names in Finnish IT such as Jorma Ollila and Risto Siilasmaa. This rather unusual concept pulls together online retailers under the Fruugo banner. Basically the firm is an online salesman of sorts, only pulling commissions from the sales it makes. It is also trying to make shopping “social” in some manner that I can’t quite figure out. I think you can “like” products or something akin to this. I guess this is the equivalent of sticking a “David likes this!” note on a six-pack of Karhu at my local Alko.

IF you are wondering what use it is, you’re not alone. Choosing a single item at random – the biography of Warren Buffett, no less – I discovered it is 64% more expensive from Fruugo than Amazon UK, including taxes and shipping. Browsing through the names of retailers using Fruugo, I couldn’t find a single company I recognised. Mr. Buffett would be frowning by now, but it gets worse.

FRUUGO made €8,236 in sales and lost €11 million last year. Yes, you read that correctly. At least it was better than 2008 when it had no sales and lost €14.5 million. Even the auditor pointed out that there is uncertainty about its access to funding, which could affect the company’s ability to continue as a going concern. Auditors practically never proclaim things like this because their job is simply to say if the numbers are accurate, not to interpret them.

SOME in the Finnish IT community have been rather gleeful at Fruugo’s troubles. They didn’t like (or perhaps understand) the concept. There is also the distinct possibility that some enjoy the thought of successful people failing at a project.

I DON’T know what the future of Fruugo might be, but based upon the information that is publicly available I can understand some pessimism. If it fails there will doubtlessly be some self-satisfied smirking. This is understandable given human nature, but it is still unhelpful.

FINLAND needs risk-takers. It needs entrepreneurs who dream big. Finland needs people who want to create the next Nokia. Taking a chance means there’s a chance of failure, and business failures inevitably happen. At least the people at Fruugo are taking a risk. If it fails, they should still be celebrated for trying. It is certainly better than the alternative.

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