BUSINESSWEEK ONLINE : MAY 15, 2000 ISSUE
BUSINESS WEEK E.BIZ -- SPECIAL REPORT Attention, Kmart Clickers Few retailing icons resonate as deeply in the American shopper's psyche as Kmart Corp.'s (KM) classic ''blue light specials.'' It's no surprise, then, that the folks running Kmart's new Internet spin-off, BlueLight.com, are heavily into Kmart kitsch. Their San Francisco offices are adorned with dozens of blue lightbulbs, including two original siren lights on wheels that Kmart store managers used until 1992 to direct Kmart shoppers to special deals. On Tuesdays, BlueLight's hip young employees even dress the part, with clothes purchased at Kmart. Explains BlueLight.com President Mark H. Goldstein: ''We have to really make sure they understand where America shops.'' Up to now, that hasn't been at Kmart online. Virtually absent from the Web, Kmart now has an aggressive new strategy to challenge the dot-coms. Goldstein is betting that Kmart's brand image and reputation for value among middle Americans will be his most potent weapon against online rivals. Says analyst Meredith Medland of researcher Jupiter Communications Inc.: ''It costs so much to build a brand online, it made sense for them to go back to something that's familiar in the minds of consumers.'' Now in test mode, BlueLight.com is a joint venture between Kmart, which owns 60%, and Japan's Softbank Venture Capital, which chipped in $62.5 million. Martha Stewart Living Omnimedia owns a 5% stake and is promoting the site on its own Web site. Independence from Kmart's Troy (Mich.) headquarters may help BlueLight rev up to Internet speed. ''It's the right strategy,'' says Goldman, Sachs & Co. analyst Anthony Noto. Indeed, Goldstein aims to make BlueLight.com more than just Kmart online. Starting in mid-May, the site will offer a complete range of Kmart goods, from Martha Stewart sheets to motor oil. By August, Goldstein promises a much broader site, with three times as many items as any Kmart store, plus travel and financial services and health and child-rearing tips. All that's in addition to the site's initial hook: free Internet service. In just four months, some 1.5 million subscribers have signed up, the fastest Net-service sign-up rate in history. Most are low- and middle-income shoppers who learned about the service at their local Kmart--and 40% are new to the Net. Goldstein figures Net service will keep them coming back, eventually to buy. Door to door. To get the shopping site rolling fast, BlueLight.com tapped online logistics service SubmitOrder.com of Columbus, Ohio, to fill orders. Kmart has its own distribution centers to supply stores, but shipping directly to customers' mailboxes requires very different methods. To bolster the chances of the outsourcing approach, which hasn't worked for some e-tailers such as eToys Inc., Kmart is taking a more active role in SubmitOrder.com--an equity stake of undisclosed size. Goldstein hopes his ability to piggyback on Kmart advertising will help turn BlueLight.com profitable within a scant two years. Despite the recent correction in Internet stocks, he's eyeing an initial public offering. But first, he has to deliver the goods. Otherwise, BlueLight.com could end up on the clearance rack. By Joann Muller _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Wooing the Newbies CHART: More Women... CHART:...Lower Salaries... CHART:..And Less Education Attention, Kmart Clickers INTERACT E-Mail to Business Week Online

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