The slow collapse of online retailer The Iconic is a bit like watching a drug addict spiral into eventual destruction. Everyone knows it’s going to happen, it’s just a question of when the body will be carried out.

Last week, the struggling dot.com announced it had raised $28 million from family-owned Belgian investment company Verlinvest. But like almost everything that emanates from The Iconic, the latest round was one part smoke, two parts mirrors. Verlinvest chairman Frederic de Mevius was typically ebullient, stating:

“The Iconic management team has done an exceptional job of growing the company during the past year, and we are happy to be investing in this great success story.”

The truth appears almost the exact opposite, despite the repeated claims of The Iconic’s “founder” Adam Jacobs (like all executives in Rocket Internet-led companies, Jacobs didn’t found The Iconic any more than I founded Facebook — he was simply appointed by Rocket and handed a sliver of equity and a relative small salary to try to grow a successful business). Crikey can reveal The Iconic has lost a jaw-dropping $45 million in around 17 months of operation — even more concerning given the entire business only generated $31 million in top-line sales.

Staffing costs were $20 million, while more than $1.2 million was lost on stock obsolesce and $5 million on “administration expenses” (they must be using gold-plated paper clips down at Surry Hills). The main asset on The Iconic’s balance sheet is tax losses of more than $13 million, which sits alongside $8.2 million in inventory.

The reality of The Iconic’s position contrasts with the cheery public pronouncements of Jacobs, who told TechCrunch earlier this week that the business was:

“… seeing strong growth in the Australian market and are targeting a much faster time frame — the customer response to The Iconic brand and experience has been far stronger we would have imagined. So we are now focused on sustainable growth and are tracking well to our long-term goals.”

Iconic insiders seem to disagree, commenting on TechCrunch:

“The [Iconic] is built on smoke and mirrors. The metrics they release are forged. The visitors. The growth, everything. They don’t have 500 brands. They have under 100 brands. They don’t have [45,000] products. They have under [10,000]. The ‘co-founders’ aren’t founders, they’re employees [with] fancy titles. The money raised was for Rocket not Iconic. The place is a sham. And the guys running it are clueless.”

The last point is especially percipient. Six months ago this columnist was suspicious of The Iconic’s claims and undertook company searches to try to determine the respective shareholders of participants in its first two capital raisings (The Iconic reportedly raised $20 million from JP Morgan last year and another $26 million from Summit in January this year). The problem? ASIC company searches reveal the only shareholder of The Iconic is a Rocket holding company based out of Germany. The funds allegedly raised from Summit, JP Morgan and this week Verlinves, were not invested directly in The Iconic but handed to the Rocket mothership in Germany.

Cynics would suggest Rocket has raised funds from investors and handed a small amount to The Iconic, using those cap raisings to create some sort of faux market value for the terminal business. It would be difficult to imagine any investor foolish enough to place funds in The Iconic on any sort of valuation given its massive losses and management foibles.

Meanwhile, the overly bullish public comments continue in earnest. Ever since Alan Kohler’s first glowing article on The Iconic in June last year (which seems like it was ghost written by a PR firm), Jacobs and his fellow “founders” have clung to the claim the website has 150,000 unique visitors daily (4.5 million monthly). Various news outlets have repeated those dubious statements. The reality is that a Nielsen search reveals that The Iconic is generating around 700,000 unique browsers monthly (a volume that matches its relatively tepid Alexa ranking of 258) — a fraction of the figures claimed by The Iconic (not to mention the fact figures are boosted by paid affiliate searches, which contribute virtually nothing to revenue).

As of December 2012, it’s understood The Iconic was down to its last $1 million in the bank. Emergency funding from Rocket has kept the doors open since then, but with Rocket boss Oliver Samwer believed to be in Sydney last week for crisis talks, they may not stay open for long.

*Disclosure: Adam Schwab is the managing director of the AussieCommerce Group, parent of online retailers including Cudo and Deals.com.au

Response: The Iconic founder Adam Jacobs writes:

I guess at least there was a disclosure at the end of Adam Schwab’s story about our company that revealed he has a commercial interest in a number of online retailers, including Cudo and Deals.com. Unfortunately, this is a story riddled with errors and massive disconnects in logic. From misrepresentations, deliberate or otherwise, of our financial position to countless allegations, implied and direct, about our investors, our strategy, our status, and our motivations, this surely is not worthy of Crikey. The facts are these:

  • The Iconic is Australia’s #1 fashion website with over 4 million visits (or over 3 million unique visitors) per month, please see the chart below:
The Iconic
  • Typically online e-commerce retailers take several years to reach profitability. We are tracking against an accelerated timeframe and are confident that we will continue to meet our internal milestones and targets, just as we have done to date.
  • We have been highly successful in attracting investor support. The additional $28 million in planned financing led by new investor Verlinvest, in addition to the $50 million-plus raised previously, completes the largest-ever investment into an Australian e-commerce venture. Other existing investors include J.P.Morgan and global e-commerce incubator Rocket Internet.
  • Those investments were made with full access to our financials and our strategy and were completed following many months of due diligence. Those investments represent a compelling vote of confidence in our vision and strategy.

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