Kmart takes spotlight on BlueLight site

The company debuted its new site on Tuesday. In addition to the Kmart brand at the top of the page, the site promotes in-store deals and offers an online copy of the company's advertising circulars that go out in daily newspapers.

"One of our new goals is to strengthen ties with our parent company," BlueLight.com spokeswoman Abigail Jacobs said. "We're hoping to present a joint image online or offline."

Kmart has been struggling in both realms. Squeezed by the economic downturn and competitive pressure from the likes of Wal-Mart and Target, the brick-and-mortar retail company filed for Chapter 11 bankruptcy in January and closed 283 of its more than 2,000 stores this year. Meanwhile, the company posted a $1.4 billion loss in its first quarter, which ended May 1.

BlueLight.com, Kmart's online subsidiary, has fared little better. Launched as a spinoff in which Kmart only had a 60 percent stake, the company bled money, losing $120 million on $26 million in sales during its 2000 fiscal year and $55 million on $8 million in sales between Feb. 1 and July 31 last year.

In response, BlueLight began charging for its formerly free Internet access service and laid off much of its staff. Kmart eventually stepped in last summer and bought the 40 percent of the company it didn't already own. Kmart also named Richard Blunk as chief executive of BlueLight in November, replacing Mark Goldstein, who resigned as chief executive earlier in the year.

The company also changed its product selection, dropping many low-margin items, such as women's apparel.

The changes have improved BlueLight's fortunes. The company reduced its losses in the second half of 2001 by 75 percent, Kmart said in a recent regulatory filing.

Although BlueLight will remain the name of Kmart's online subsidiary and of Internet service it offers, the name of the Web site and its URL will change to Kmart.com, Jacobs said. Currently, BlueLight's customers who access Kmart.com are redirected to BlueLight.com, but Jacobs said the company plans to make Kmart.com the default URL soon.

Kmart has been promoting the Kmart.com URL in television advertisements since February as part of a test to see if that URL had more appeal to customers. Through that and other tests, BlueLight found that the Kmart name was a bigger draw than its own moniker, despite Kmart's financial troubles, Jacobs said.

"People still have affection for Kmart and the Kmart name. It's more recognizable than the BlueLight name," she said.

Despite the changes, Kmart's move to name its online store BlueLight.com was not a mistake, Jacobs said. The company was originally supposed to have an initial public offering and be independent of its parent, a plan that was aborted because of the market downturn, she said.

"At that point, it became more obvious that the corporation's ties to the parent company would benefit the online site," Jacobs said.

To promote the new site, BlueLight is offering a 10 percent discount on purchases of $99 or more made from June 20 to June 30 through Kmart.com. The discount cannot be used for pharmacy purchases or in the company's photo center.

Kmart is only one of a number of traditional retailers that have brought their online operations back in-house. Others include Wal-Mart, KB Toys and Petsmart.