Play.com closes direct retail business

Company's retail business never recovered from end of VAT loophole

Play.com has had to finally admit defeat in the face of last year's Jersey VAT loophole closure and announce the end of its direct product retail service.

Founded in 1998 as the dotcom and e-commerce boom took hold, Play.com's waning fortunes saw it sold to Japanese online retail firm Rakuten in September 2011 for just £25m. The Jersey-based company took a severe financial hit as a result of the removal by HM Revenue & Customs of Low Value Consignment Relief tax for Channel Island imports in April 2012.

Play.com is making 147 staff redundant in Jersey, in addition to 67 redundancies across its Cambridge and Bristol offices.

Play.com said in a statement: "Moving forward we are intending to focus exclusively on our successful marketplace, which is our main business area, and to phase out the direct retail part of our business."

In August 2012, Computing interviewed Play.com's CIO Franceso de Marchis, who at the time seemed to predict a positive outcome for Play.com's ongoing relationship with Jersey:

"We didn't shut down in Jersey, but we're considering other options. We didn't need to increase the price [of goods] - we didn't want customers to feel the pain for that, so we took the hit. Sometimes we're selling at a loss, to be honest."

De Marchis spelled out plans to work closely with the Jersey government on a solution, stating that Play.com was of significant importance to the island's retail economy and postal service.

"The UK government sees it as closing a loophole, but the Jersey government has to work out if they want to work with us or not on this one, because right now we're doing 70 per cent of the Jersey post business," said De Marchis.

"So if we shut down, the Jersey Post is going to be heavily impacted. So now the question is: are they going to work with us, yes or no?"

Today's announcement suggests the answer may have been a firm "no". De Marchis also suggested that Play.com might be in the market for "a better partner" to continue handling its shipping, but this idea also seems not to have come to fruition.

Rakuten specialises in business-to-business-to-consumer e-commerce, suggesting that Play.com's stated shift in focus to small business-run independent markets may have a brighter future than the doomed direct retail plan.