iVillage Turns Away from E-Commerce

Women's online network iVillage (Nasdaq: IVIL) ended months of speculation with the announcement that it is selling its iBaby e-commerce business to online rival Babygear.com, and closing two of its other e-commerce sites, iMaternity.com and PlusBoutique.com.

Turning away from e-commerce is another milestone in a difficult year for iVillage. The company posted a $25 million (US$) loss in the first quarter and saw the abrupt departures of its chief executive officer and chief financial officer during one tumultuous week in April.

The latest move by iVillage follows a similar step taken by one of its primary competitors, women's network Oxygen, two weeks ago. The Oxygen network made headlines with a splashy launch, only to announce less than a year later that it would be discontinuing direct retail sales from its Womenshands site in June. Oxygen also closed its e-commerce site Picky, merging it with a new shopping information service, Shop 02.

Content is Queen

iVillage is going to focus on providing relevant content to women and working out new advertising and sponsorship deals.

According to the company, advertising and sponsorship agreements have much more profitable for the company than e-commerce sales . Some 85 percent of the company's revenues are from the two categories, while the remaining 15 percent of iVillage's revenues came from e-commerce sales.

"As we continue to concentrate on our media-based content business, we can remain active on an e-commerce platform through revenue-generating sponsorship agreements with category leading companies rather than carry the fulfillment side of the equation ourselves," said iVillage CEO Candice Carpenter.

Throwing Out the Baby

The terms of the iBaby deal with Babygear.com were not disclosed, but iVillage is taking an equity stake in the company. Babygear.com is funded by Vantage Point Venture Partners and Gruner & Jahr, a division of German media giant Bertelsmann.

The New York-based network also said it has formed several five-year sponsorship deals with Babygear.com to be featured on its home page and other iVillage-owned properties.

iMaternity Leave

In an abrupt turnaround, iVillage is turning over the operation of e-commerce Web sites iMaternity.com and PlusBoutique.com to Dan Howard Industries, a longtime retail partner that operates some 200 Dan Howard and Mothertime maternity clothing stores in the United States.

Just last month, iVillage announced the launch of iMaternity.com with Dan Howard as a partner in the venture. Now iVillage is restructuring its agreement with the company to be a sponsorship partnership, rather than a retail partnership. Dan Howard has also worked out an exclusive agreement with Babygear.com, the company said.

Taking Stock

With the costs of running the e-commerce sites off the books, analysts say that the network can get back on track. iVillage has seen its share price plummet from a 52-week high of 67 7/8 to 8 1/2 at the end of trading Thursday.

Some of that loss can certainly be attributed to the overall demise of e-commerce stocks, but analysts also have specific questions about the direction the company has taken in recent months.