Fruugo Lays Off 40% Of Its Employees

fruugoOn Monday Fruugo, a Finnish startup that in 2008 burned through € 14.5 million, laid off roughly 20 of their 50 employees, which equals to 40% of their whole work force. Fruugo CEO, Juha Usva, confirmed the news to me yesterday evening.

When I asked how much money Fruugo still has in the bank and how long will it last, Usva emphasized that 'the situation is tight'. According to some this means that Fruugo won't have enough money to pay their employees' monthly salary due on the 15th. Whether that's true or not, the financial situation of the company is clearly critical.

Usva also confirmed that Fruugo is still running 100% on risk capital as can be guessed. The company has a few thousand daily visitors visiting their site and out of the 200 retailers which they have so far secured, they have integrated 70 or so. The company is currently focusing firmly on Health and Beauty products to build a compelling product portfolio one niche market at a time. This approach is different from before where they had products all over the place. The Health and Beauty category has seen some healthy demand and the company has even started to market itself slowly through banner advertising and Google AdWords, although only in Finland. Most of Fruugo's users still come from Finland, but large chunk of the most popular stores are in the UK. Especially Myfaveshop (UK) that has partnered with Fruugo has turned out to be very popular among Fruugo customers.

We hope Fruugo can hold the line and get the badly needed next round of funding. It would be a loss for Internet entrepreneurship in the whole region to see such a big dream go unrealized. With Fruugo, just as with Igglo, a late Finnish real estate broker startup, it takes a whole lot of courage, vision and leadership to take a big idea to market. But as with all the big dreams, the risk is proportional to the upside.

We all have the same amount of time in a day but only a few brave ones decide to spend it on creating something really big that matters. This is because one needs to commit all she has, endure a lot of pain in the process and still have the odds against her. That's what Fruugo is doing and that's also what Spotify is doing. In both cases I would hate to see the I-told-you-so folks get the last word. The local entrepreneurial culture has most to loose. But also most to win.

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akonan October 07, 2009

So bummed.

Sardar Mohkim Khan, October 07, 2009

That is sad to know. I just hope they manage to pull some funds in to get things going.

During my visit to Finland, i just found the ideas of each startup great, but to be honest the market isn't really there for the startups in their region. Which is why they have to target the global market from the very first step. I guess that sort of divides their attention to a certain extent.

jkaljundi October 07, 2009

Only few thousand visitors per day?!

Is this an example of startup spending most of their money on product development and leaving almost none as a strong advertising and marketing budget? It's one thing for a bootstrapped company to do product prototyping only, but for an investment like this, you have to hedge your bets and spend quite strongly on advertising and other marketing activities (or save a budget for that).

Jon Martin October 07, 2009

If Fruugo fails like this it's a disaster. What I mean by "like this" is that it's not even out of beta and they've spent €40m. I don't think they can fail like this - surely the company could focus on some segments like it is and keep going for €1-€2m per year. The technology has been built right?

I still wonder where the money is going. Surely the bulk of it must be salaries - let's say 60%. If they had 50 employees in 2008 and burnt through €14.5m, that's an average salary of €174,000 per year ($252,300!).

I'm still sure there is a market but they need three things: it needs to be easy to find and buy stuff; the stuff needs to be worth buying; and the price needs to be competitive. They've got the first one but they're struggling with the others.

It's easy to say these things in hindsight. I'm sure they're doing their best but if they really are running out of cash the strategy should have been changed 6 months ago.

Lasse Enersen, October 07, 2009

"The company is currently focusing firmly on Health and Beauty products to build a compelling product portfolio one niche market at a time"

Firmly? Fruugo would be firmly focusing on Health and Beauty market if it only had those products for sale, and nothing else. But Fruugo has made the mistake to uneagerly try to "cross the chasm" already during it's launch, way before the niche market is conquered, by selling a wide variety of different products, thus making it firmly a marketplace for everything. You can't be two things at the same time.

"...I would hate to see the I-told-you-so folks get the last word"

I can honestly admit to belong in this group. I haven't been able to get what they are really trying to do. It hasn't been very clear at all why a retailer would want to participate as they don’t have that much traffic.

Open and direct criticism against stupid ideas is very healthy for the entrepreneurial atmosphere. Finland has too many fevered egos patting each others backs and congratulating themselves for non-successes.

DJVassallo October 07, 2009

Fruugo seems to be infected by the same virus of over-optimistic-in-success-start ups, couldn't resist the fever to expand and cover too much too fast?

Hope they can get the right medicine...

Jani Pennanen, October 07, 2009

Where did you get the traffic figures? I'd be interested to hear more about them and of course also about their conversion figures.

Jani Penttinen October 07, 2009

If they indeed fail (and even if they don't!) I would love to see a postmortem from the main guys... obviously something is not going as planned. It would be interesting to know what exactly was the plan and why it didn't work out.

Chris Comella, October 07, 2009

I'm speechless. This is why you don't take or make these kinds of investments (in massive burn rates). We see this same mistake repeated over, and over, and over.

Tommi Rissanen October 07, 2009

Finland really needs Fruugos and Igglos. Nokia's idea to concentrate on electronics was mad at its time and had undoubtly loads of Itoldyouso-prospects waiting for them to fail.

Success and failure is always depending on the right strategic choices - but also a number of lucky incidents. Outsider's interpretation of Fruugo's unfortunate situation (that hopefully is not the end of the story) could be that there was some kind of strategic misinterpretation that delayed the launch of the service and bad luck that the economic downturn destroyed the potential market meanwhile.

Wishing the best for both the company and its employees.

Hannu Makarainen, October 07, 2009

I didn't understand the neat idea of the company, and no changes after that.

If they don't "have enough money to pay their employees’ monthly salary" that means the end in Finland. Soon or later.

Sure, it's sad story for people, workers there.
- No finance,
-> No romance

peter, October 07, 2009

Huh, so wishing that this would still work out. The loudest MF'ing Start Up ever, and has a pretty good business model...

However, pioneers are often (always) buried alive...

...and then someone else does the same better, cheaper, faster...

Good luck anyway!


Sam, October 07, 2009

Would be so nice if would work, but I have never understood any competetive advantage they would have over Amazon (marketplace).

Amazon works very nicely and fast, is widely known and has tons and tons of stuff, whereas fruugo is terribly slow, no-one knows about it and does have very limited selection.

I quess were had to be a plan how to compete with Amazon, but for the outsider (for me anyhow) it is impossible to see anyway how Fruugo could compete with amazon.

Anyone any idea?

Jon Martin October 07, 2009

I understand the frustration at the execution. I'm less understanding of the failure of commenters on this thread to get the idea. Obviously, the ability to buy and sell goods without bureaucracy throughout Europe is a great idea - especially if it appears seamless to the end user - which it does. It means Latvians can sell stuff to Greeks despite legal and language barriers. This larger market should means that a) there's more choice - you can buy things you couldn't before at the click of a button; and b) things are cheaper because of competition.

They never got to Latvia and Greece sadly but it ain't over yet.

Ville Vesterinen October 07, 2009


I got the traffic figures from Mr. Usva himself. He did not quote any specific number, but used the expression 'A few thousand' instead, which I take to mean less than 5K.

Fruugo rauhoittaa vauhtiaan lomautuksilla –, October 07, 2009

[...] ArcticStartup uutisoi tuoreeltaan Fruugon lomautuksista. Noin 50 hengen henkilökunnasta lomautetaan noin 20 henkeä. [...]

Jani Penttinen October 07, 2009

That is a low number given the amount of PR they have received. Basically they should be receiving more traffic just as search engine traffic. Looking at their site, it seems not search engine friendly, which is a shame. This type of stuff should be the first thing in mind when building a web based community.

jkaljundi October 07, 2009 has Alexa rank of 176k. For comparision:

One of my sites is 165k and has 5-9k unique users per day.
Another site we have is 181k and has 6-9k unique users daily.
Third is rank 53k but that has already 17-22k uniques.

So something between 5-10k for Fruugo seems realistic.

P.S. I still believe Fruugo is a great idea, Europe and Finland need it and I want them to succeed. But it needs heavy investments into sales, marketing and advertising.

Juho Tunkelo October 07, 2009

Well, I for one wish they will pull off some bridge financing and pull away into phase two.

Unfortunately, even looking from the outside the writing has been on the wall for some time. For one, not sure what their traffic strategy has been, but... banner ads and PPC? Please.

Affiliate relations, media buys, strategic partnerships... this is what you'd expect to see in the next phase. Let's point our collective thumbs toward the sky and hope for they make it!

Antti Hannula October 07, 2009

I searched for shampoo... selected a random product from the results


It seems it's in English even though I'm logged in as a Finnish language user...


Give your hair firm control with added volume and lift. Wella High Hair Styling Mousse is designed to provide any style volume and maximum control. Your hair will be left with a glossy shine. Käännä »

... well I press the button "Translate" and get the following Finglish text...

Wella High Hair STYLING MOUSSE - kiinteitä 150ml

Anna hiusten tiukkaa lisätty määrä ja hissi. Wella High Hair Styling Mousse on suunniteltu tarjoamaan mitään tyyliä määrä ja enintään valvontaa. Hiukset jäljelle jää kiiltävän kiiltoa.
powered by Google

... all those who know Finnish can easily see that the text makes no sense at all. Were the multilingual capabilities supposed to be one of the (or the) competitive advantage maybe?

dee, October 08, 2009

As a Finland-based web enterpreuner and as a person hoping that web-based services and publications could play a somewhat significant part of Finland's exports in decades to come, I'm afraid... Very afraid..

Back in late 1990s when rest of the world invested heavily, extremely heavily on dotcom companies, Finland had the tech craze as well -- investors big and small throwing money at ITC startups (with the difference that in Finland, the money never went to dotcom companies, but we somewhat managed to "link" the cell-phone-back-cover-plastic-molding-companies that Finns invested in to the dotcom companies everybody else invested in). They got burned. Nobody dared to invest to anything for over a half a decade. When finally some small successes are emerging, the biggest dotcom darling of the investors in Finland is about to hit the wall. If they go tits up, I don't expect to see any Finnish money (outside Tekes) going to any Net companies in a decade or so.

Ville Vesterinen October 08, 2009


I dare to say you are wrong in your prediction. I have faith in Finnish investors (of which there are more and more) that they see the new wave of startups that are strong in numbers, not in size. The same ones I am seeing. Only the biggest ones end up on the pages of the old media, and those have been old stories for the investors by the time the old media gets to know about them in any case. There's strength in numbers, not in a few high profile Board members who made their successes in a different field of business altogether. Here's current Finnish numbers to start with[country_id]=4

The public has not seen the next wave of Finnish startups yet, but the signs are everywhere.

On the other hand the startups are still in stealth mode building their products, making connections and getting to know the field. There's a large number of startups that are set up by experienced people who are tired of corporate treadmill and economically well enough to have the financial freedom to experiment with a project or two after 10+ years at the BigCo. Their numbers are magnified by the fact that the big companies are not faring that well and cutting cost rather than pushing people up the ladder towards bigger salaries. We start to see the first ones appear some time late spring 2010.

The other half is still in university and thinking about what to do when school's out. There is a big sea change happening that you might have missed. In Finnish universities graduating students have, the first time since I know of, taken entrepreneurship to their portfolio of 'what I would like to do when I grow up'. This might sound minor thing, but it's bigger than Fruugo can ever be. If you for example look at the great work that Aalto Entrepreneurship Society in Helsinki is doing you see that 1) they are finally making entrepreneurship sexy in the Finnish university system, but perhaps more interestingly 2) these students who are acting as change agents are already excited about entrepreneurship, and that must have come from somewhere to begin with. The culture is changing.

As I wrote above "The local entrepreneurial culture has most to loose. But also most to win." And here I believe we are now collectively smart and responsible enough (Yes, I'm looking at you too old media!) to choose the latter by explaining what it means to the country that we have seen an idea like Fruugo to be attempted in Finland at the same time as Spotify is being build in Sweden to become the next SAP. I have not seen such projects been attempted since the accidents of the DotCom era, where the tide lift all the boats and the successes were lucky accidents being born on the forefront of the Internet technologies. That said, there's nothing wrong being lucky.

And whatever happens to Fruugo (and I hope they'll get hit by a hell of a growth), I am confident that young people who are well educated on the 'ins' and 'outs' of entrepreneurship will see great effort in educating their whole graduating class on the topic. Making the others see that changing the world is risky business, but that the biggest factor influencing one's success rate is sheer determination and that only by having big failures will there ever be big successes.

Ari Tenhunen, October 08, 2009

Sad to hear about Fruugo’s failure. I do not know Fruugo’s great business idea but as I visited Fruugo site it appeared to me as an ordinary e-commerce service.

It may have excellent technology, innovations and business models behind it, no doubt. But in the end the success depends on the customer appeal and continuous visibility in everyday media. This is not cheap if you want to build a global or even national prestige. The money that Fruugo has spent is not sufficient to gain a decent position internationally in this highly competetive market area.
The only way to become noticed and get high volumes of customers coming in would be to come out with a highly visible and appealing marketing campaign and then do continuous marketing actions to keep the position in customer’s minds. Well - Fruugo seems to have some fame among start-up community. But how well known it is to target customers?

This is typical in Finland the Engineerland. We think it is enough to create the world’s best solution although there are already thousands of examples of brilliant inventions that fail because of drastically undersized promotion and marketing investment. And everybody seem to know that.

If we learn this thing and If money for conquering the markets becomes available I am sure we will have lots of success stories. There’s no shortage of innovations and brilliant developers in this country.

dee, October 08, 2009

Ville, I like your optimism :-) I have to agree with your notion that the enterpreunial spirit is on a rise here in Finland, which is very refreshing, considering that in the past, most of our "best and brightest" have opted to get employed by as-big-as-possible corporation and make their career within that corporation, rather than considering the enterpreunial path.

Now, we just need to build an actually-working ecosystem whereby even a small start-ups could get seed-funded without the burden of spending half their first year of business filling Tekes documents. Sometimes an idea-to-business path needs only e50k funding, just to get the father/mother of the idea to justify quitting (which, IMO, is the biggest obstacle for many people past their 30s, with mortgages, family, etc) his/her secure'n'safe day job and pursue his dreams. And getting that kind of small funding without the gazillion-plus-some application papers is next to impossible..

Sheila Riikonen October 09, 2009

I strongly agree from a marketing communications perspective on two comment threads here:

"I’m still sure there is a market but they need three things: it needs to be easy to find and buy stuff; the stuff needs to be worth buying; and the price needs to be competitive." -- Simply put, what's a product if nobody knows about it?!'

"It may have excellent technology, innovations and business models behind it, no doubt. But in the end the success depends on the customer appeal and continuous visibility in everyday media. This is not cheap if you want to build a global or even national prestige."

"The only way to become noticed and get high volumes of customers coming in would be to come out with a highly visible and appealing marketing campaign and then do continuous marketing actions to keep the position in customer’s minds."

- Believe in the superiority of your product; but don't stop there; tell others about it, too!

Perhosgrafiikka Blog : Blog Archive : Troubles of Finnish startup Fruugo { Perhosgrafiikka }, October 10, 2009

[...] blog also covered Fruugo situation in their post. Jugding from the comments, many people see lack of advertising as a problem, because outside of [...]

stig, October 10, 2009

To build something so huge on a market that's already filled by the biggest names in the e-commerce industry seems like a very risky undertaking. It feels like they've had this grand idea and a firm belief on the skills of the founders and people on the board to strike gold on the first attempt. But is it worth of tens of millions and years of development effort to get a site online? I don't think so. My gut feeling tells me to start and try things on a more modest scale and see what sticks. Build a more concentrated site with one or two product categories, see if you can make it appealing enough for sellers to have their product listed on the site and for buyers to use it to find what they’re looking for.

The factors that contribute to a site's success are numerous and very difficult to get right. The site seems very plain to me, and has very little compared to some other sites to draw people to do their product research and shopping.

Jani Penttinen October 10, 2009

Stig raises a valid point - most of the succesful startups begin as something useful for a small group of people and then grew organically if others also find the service useful. Fruugo didn't start this way. It is extremely hard to build a large system in blind and then expect it to be what people want.

However, I don't think Fruugo failed on the market. It seems to have failed to reach the market in time before the money ran out. Which would indicate it was a failure of execution and we may never find out the validity of the idea itself.

Still... one of the things that breeds success stories is persistence. Let's hope the core group behind the company will find a way to pull it all together.

truthaboutfruugo, October 22, 2009

The founder of Fruugo, Nils Forsblom, has been "let go" along with Kalle Vuoristo (the "CTO?"). Rumor has it that after the latest staffing cuts that there are only around 10 to 15 people left (give or take a few) ... and it is probably questionable if any of them are really capable of implementing the concept now that the visionary is no longer there.

Don't have to be a genius to "read between the lines" to understand the "few thousand daily visitors" comment from Fruugo. At best, this means that if they can convert 5% of those "visitors" into customers, then they're only processing 150 - 200 orders per day (maximum). At that rate, how many thousands of years until they hit the break even point (and earn back the €40+ million that has been "invested" to date)?

At the top of the hype curve (in the blog-sphere), Fruugo had around 120 people working on the project and maybe half of those were consultants. Can only imagine that the burn rate on that level of staffing was very high. And, one can also imagine that a large portion of the "capital invested" was spent on platforms/software/systems/consulting, etc. that was never used.

Millions of Euros of Finnish taxpayer's money was also invested in this start-up.

€40+ million and never made it past Beta? Oho!

Aika antaa takaisin verorahoja veronmaksajien?

truthaboutfruugo, October 23, 2009

By the way, did anyone in leadership at Fruugo read both books on the "" disaster? It lost somewhere around €50 million in the last Internet bubble.

Did history just repeat itself?

Pöyhkeys vie perikatoon, ylpeys käy lankeemuksen edellä.

Ville Vesterinen October 23, 2009


"The founder of Fruugo, Nils Forsblom, has been “let go” along with Kalle Vuoristo (the “CTO?”)."

We are in the process of looking into whether there's any truth to the claim, but meanwhile, do you know why and how did this happen?

Paavo, October 25, 2009

Finns have to soon accept they are nothing special and most start-ups in Finland are about the same as the average start-up from a 5million person sized American or European city. When it comes to developing the start-ups of the future, the best ideas will come from the places with the densest concentrations of people, intellect and capital (New York, San Francisco, Paris, Tel Aviv, Mumbai, Beijing).

Jani Penttinen October 25, 2009

Paavo - Finns have "accepted" this a long time ago unfortunately. What needs to happen is that we *realize* that what you said is not true and the true innovation comes from people who believe in themselves and network with other like-minded people. Raising money in Finland is hard, but this doesn't have anything to do with coming up with good ideas...

Ari Tenhunen, October 25, 2009

I agree with Jani. New Ideas are created by open minds who dare to challenge the world, who ask questions, who are not conformed to status quo. It is not the metropols of the world that create all the ideas, very often the world changing ideas and inventions are born far away from the centers. For example Oulu is a globally noted technology center. Quantity is not inevitably transformed into quality. Finland can far exceed the quantitative probability of bringing out new successful inventions by investing in the research, education and support of development of new technological innovations and what is more important, product development, branding, commercialization and marketing.

Boom Or Bust? Social Shopping Startup Fruugo Raises Funding To Stay Alive | Tech stuff center, October 30, 2009

[...] clos&#101d b&#101ta p&#114oduct li&#118&#101 and w&#101&#114&#101 ultimat&#101ly fo&#114c&#101d to &#108ay off a&#108mo&#115t &#104a&#108f of it&#115 &#119orkforce as a [...]

Technology blog » Boom Or Bust? Social Shopping Startup Fruugo Raises Funding To Stay Alive, October 30, 2009

[...] 14.5 million euros before they even put the closed beta product live and were ultimately forced to lay off almost half of its workforce as a [...]

truthaboutfruugo, November 13, 2009

@ Ville Vesterinen, who 2 weeks 6 days ago wrote:


Hello Ville,

It's now been almost 3 weeks since my post. Seems to me that you could have confirmed by now what I shared a few weeks back. Why the silence? All you need to do is make a phone call to Nils in the US to find out the current situation.

And, don't know if you've asked whoever is left at Fruugo, but if Fruugo isn't giving you a straight answer, then that should also tip you off that something might be up.

Even if Fruugo did receive its next round of financing (i.e. I find it completely amazing that they keep throwing good money after bad), I am no longer convinced that anyone with the vision and understanding of the segment remains active enough to make it work.

By the way, the answer to your question is "yes," but I'm not posting the answer here. Good luck in your quest for the inside story.

Ville Vesterinen November 13, 2009

Don't worry. We're on it!

truthaboutfruugo, November 20, 2009

Oh, I'm not worried at all ... interesting how "hot news" like this can be suppressed because of the rich and powerful people involved. Guess they don't want to look bad publicly (image management?). :-D

No more posts from me ... just remember, I told you so. :-)

Ville Vesterinen November 20, 2009


We're talking to the parties and gathering more information. I don't think its really hot news that the sale volumes are really low and the company struggling for its life. We don't know how long the financing will last or whether its realistic to expect another round given the ownership structure.

What comes to the 'hot news', I have a radical proposition for you. Why don't you be brave like the rest of us and come out with your real name, lay out what you know and back it up with the evidence or the story you have to tell. How about that? We could get conversation out of this.

truthaboutfruugo, December 02, 2009

Hello Ville. Nice try.

Share what I have for free??? You have got to be kidding! If you are actually talking with the "parties," then you already know that what I shared here on your blog was absolutely correct and accurate. And, since the parties have not stated anything to the contrary via your blog, then you've already proved my point.

There is no obligation for me to share with you what I know. When it is time to share the "evidence" that I have, then it will be shared. But, it will not be shared with you. And, it will not be shared for free.

This isn't about being "brave." How stupid do you think I am? I reject your "proposition" and recognize it for the veiled attempt that it was, by you, to try to figure out my identity on behalf of the "parties." Again, nice try...

Aikaa kirjan Fruugo? :D

Ville Vesterinen December 02, 2009

"and recognize it for the veiled attempt that it was, by you, to try to figure out my identity on behalf of the “parties.”

Now this is getting a bit thick. First you attack Fruugo and now us on conspiracy?! Trolls like you make me sad.

truthaboutfruugo, December 03, 2009

"Trolls like you make me sad."

Too funny!!! Thanks for the really good laugh (LOL). :D

By the way, how is it an "attack" if it's true? Seems you've allowed emotion to creep in and cloud your logic.

Have a good one!

Jani Penttinen December 03, 2009

When things go sour and shit hits the fan, it can feel really bad for those involved. It seems truthaboutfruugo certainly has some reasons to be bitter about something that happened.

However, for the rest of us Fruugo is simply a startup that appears to have failed. While it would be nice to know what were the main reasons for the failure, I don't think anyone is really interested in the dirty laundry.

It happens every day around the world and there's always something larger than life going behind the scenes - for those involved in the situation. It may seem like a big soap opera, but it really isn't.

I for one would not be interested in reading nasty gossips spread by people who just want to hurt others. ArcticStartup is doing perfectly good job with reporting news and there's no reason act hostile if they're not "co-operating" with every anon whistle blower that comes along...

Sheila Riikonen December 03, 2009

I totally agree with Jani! As always, the best thing to do is move on and learn from one's life as in business! :)

truthaboutfruugo, February 17, 2010

Well, it seems I was right.

At only 10 - 15 sales (avg) per day, it will take around 10,000 years for the investors to recoup their investment of anywhere between €25 - €40 Million.

From a VC perspective, it's no big deal ... for every 7 "investments" the best you can hope for is 1 "star," 2 "performers" and 4 "flops."

To me, it feels like Fruugo is a flop...

Ville Vesterinen February 17, 2010

Nice. Where do you get the 10 - 15 sales per day figure again?

Jani Penttinen February 17, 2010

I think a better question is, how would 10 - 15 sales per day generate profit to start recouping the investment, even in 10k years? The logic is flawed. Startup investors almost never hope to recoup their investment from the company revenues... :)

If Fruugo is able to reach a point where they are profitable, it is not a far stretch for the investors to still make a good return on their investments. The potential scale of the European online retail market is huge.

Heck, even if they are not able to do that, but the infrastructure is solid enough, they can still find a way to make back their money by merging with someone who have the funds to make it work. It may be a rocky road but the Fruugo service looks better than ever so let's hope they haven't given up trying.

Ari Tenhunen, February 17, 2010

Fruugo looks great, product assortment are good, premium brands, site performance seems good. The shop is there. Now it’s about getting customers in and buying. According to statistics (I would not swear on the accuracy of statistics, but they give a clue) the global ranking of Fruugo is currently something like 200.000. In comparison the global ranking of Finnish Netanttila is something like 37.000. And Mark&Spencer web shop global ranking is about 2.500. So there is some heavy marketing and promotion to do. Now Fruugo needs to invest heavily on marketing and advertising and do the right actions. Are the investors’ pockets are deep enough?

khan, March 15, 2010

really its very goood product