August 21, 2000

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Follow The Money:
No Web Bargains For Kmart

By Christopher T. Heun

ust how much does it cost to build an E-commerce Web site? At the nation's second-largest retailer, the price tag is $142.5 million--and counting.

BlueLight.com, majority-owned by Kmart, said last week it has received an $80 million second round of funding. The retail giant will kick in $55 million and Softbank Venture Capital and Softbank Capital Partners will invest $25 million--on top of an earlier $50 million investment. Martha Stewart Living Omnimedia contributed $12.5 million in the first round.

Founded last December, BlueLight .com will have all its product categories fully launched by fall. The site's free Internet service has attracted more than 3 million users--but that doesn't mean those visitors are shopping.

"The question is whether they can turn all those users into online buyers," says Heather Dougherty, an analyst at Jupiter Communications. She would rather see Kmart focus on physical assets such as installing Internet kiosks inside its stores. "Are they really teaching people to shop online, or just giving them Internet access?" she asks.

But Dougherty does offer a silver lining for BlueLight.com: "They're definitely ahead of Wal-Mart at this stage."

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