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Kmart belatedly ready to make online play

Kmart belatedly ready to make online play

Kmart has decided to invest big bucks to push its blue-light specials.

The US-based retailer plans to launch an online operation called Bluelight.com next month. It also announced recently that it will make an additional $US328 million investment in technology to boost its brick-and-mortar facilities.

At the company's annual meeting, president and CEO Floyd Hall said Kmart plans to build its online presence over the next year, with a goal of offering a wider selection of goods online than at any single existing store. Kmart now offers only a limited selection of merchandise online.

Hall added that the company hopes to make an initial public offering for Bluelight.com next year.

Analysts said Kmart is cutting back on the number of stores it opens, which leaves the company with more cash to invest in technology.

Brian Eisenbarth, an analyst at US-based Collins & Co, said the chain has been fighting "a reputation for being less than top-quality" for years. He said the online move might signify an attempt by Kmart to reinvent itself.

"Online really has been a minimal effort on their part until now," he said.

The retail chain had done well in closing old stores and improving its product line, Eisenbarth added, but the stock market perception has yet to reflect those changes.

"Obviously, the market's not convinced the turnaround's in place. Otherwise, they wouldn't be trading at $7 a share," Eisenbarth said.

Eisenbarth pointed out that Kmart's stock is suffering, compared with that of Wal-Mart stores and Target. Early last week, when Kmart was at $7, Wal-Mart's stock was selling at $57 per share, while Target's was at $67 per share.

Kmart's stock was trading at 6.5 times its earnings, while Wal-Mart's was at 38 times and Target's was at 23 times earnings, Eisenbarth noted.

That lag has followed Kmart into the e-commerce realm, where Wal-Mart and Target already boast full-service online operations.

"Kmart really doesn't have the resources Wal-Mart and Target do, and I'm not sure they should try to compete on every level," Eisenbarth said.

In an April study of the top business-to-consumer sites conducted by US-based ActivMedia Research, Kmart didn't even make the list of notables, despite its standing as the third-leading retailer in the US.

"Some companies have been slow to move, and that's what we're finding with our study," said Harry Wolhandler, ActivMedia's vice president of research.

Meanwhile, Kmart plans to invest $328 million in technology to improve customer service within its stores - an increase from $131 million last year and $132 million in 1998. The money will be used to install new high-speed checkout scanners and modernised registers at Kmart's highest-volume stores.

Kmart has already begun to promote offers such as free ground shipping to anywhere in the US on each online purchase and exclusives sales partnerships for its online store, such as Martha Stewart Everyday products and Sesame Street merchandise. The company also recently announced the distribution of more than eight million ISP CD-Roms as part of its free Internet access promotion.

BlueLight.com's Internet service is one of Kmart's key attributes of its "Sticky Bricks" business model - the integration of real-world and online assets.

"The goal is to create a "stickier" online shopping experience that satisfies the consumers' needs and wants at every turn through real-world and online retail programs," the company said.

It has also entered into online co-branding programs with e-commerce company CoolSavings, offering savings and special discounts on consumer goods and services to BlueLight.com subscribers and e-store visitors. Offers will include printable and electronic coupons, mail-in rebates, samples and other incentives promoted on a BlueLight.com/CoolSavings co-branded Web page.

Hall, who plans to retire next April, said the chain "is not yet the retailer we all want it to be." Technology appears to be a big part of the effort to run with the big dogs of the retail trade.


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