CNET también está disponible en español.

Ir a español

Don't show this again

Christmas Gift Guide
Tech Industry

Can Bluefly soar on the Web?

The Net retailer, which sells designer clothing and home furnishings below full prices, has picked up a $10 million investment from George Soros and others to boost its presence for the fall shopping season.

Bluefly, a tiny Internet retailer that sells designer clothing and home furnishings below full prices, has picked up a $10 million investment from George Soros and others to boost its presence for the fall shopping season.

With around $1 million in sales since it opened online 13 months ago, Bluefly may be ready for Christmas. However, the company still must prove it can withstand assaults if and when established off-price retailers such as T.J. Maxx and Marshalls, both owned by TJX, or Filene's--owned by retail giant May Company--get onto the Net.

"They definitely needed the capital," said Keith Menzel, a stock analyst at John G. Kinnard who rates Bluefly a strong buy for speculative investors. "Their time frame is fairly short. They've got first-mover advantage, but they've got to execute and get their brand built up."

The company said the investment will be poured into marketing to boost Web site traffic and inventory. Menzel said the company had less than $1 million in inventory, a potentially severe crimp on its sales. Analysts say off-price retailers sell $27 billion a year in discounted goods.

Ken Cassar, digital commerce analyst at Jupiter Communications, notes that Bluefly is trying to build its brand in a category where the look and feel of the merchandise is important to consumers.

"We have certainly seen Internet-only brands created successfully, but they've all been in commodity product categories, [such as PC hardware and software, books, videos, and electronics]" Cassar said. "Bluefly is trying to do something that is very challenging."

He thinks the investment by billionaire Soros's Private Equity Partners is a key endorsement of Bluefly, especially over online rivals Cybershop and OutletMall.

And it could help Bluefly with a key challenge for off-price retailers--access to merchandise--which generally comes from manufacturers who make more clothes than they can sell or from mainstream retailers who buy more than they can sell.

Investors liked the news, bidding the stock up 2.25 to close at 12.38. The company, which went public in May 1997 as a brick-and-mortar marketer of golf and casual wear, has traded as high as 24.50.

Last month, Bluefly added home furnishings, a teen category, and gifts to its storefront. Although chief executive Kenneth Seiff thinks the site's personalization feature, MyCatalog, is its key advantage.

"We're the only [off-price retailer] to develop the technology to personalize the offerings, and we are exploring a patent," said Seiff. He also noted that because off-price stores don't sell a full line of merchandise, the personalization tools let shoppers find what's in stock in their size among the 150 brands Bluefly carries.

Seiff said he targeted discount apparel because no traditional print catalogs have targeted that segment, and because the shopping experience at established off-price retailers has been traditionally thought of as unpalatable.

"The existing offline models have successfully lowered customers' expectations for so long that we believe that if we build a better mousetrap, we will capture a very large share of whatever market gravitates online," Seiff said.

Bloomberg contributed to this report.